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The dollar dilemma

31 January 2017

The post-US election rally on global equity markets continues. The Dow Jones Industrial Index hit 20 000 index points to much fanfare, but professional investors pay little attention to the Dow since it is weighted by share price, not market capitalisation. The S&P 500 also hit record highs, buoyed by the prospects of higher profits thanks to President Trump’s proposed tax cuts, a more solid global economy (which predates the election) and rising inflation, which supports corporate pricing power. Locally, the JSE All Share Index has also performed well since the start of the year, in contrast to January 2016 when global and local markets were experiencing turmoil. This means that the 12-month return on local equities is looking very healthy for the moment.

China and shadow financing

24 January 2017

For the first time ever, the president of China was in attendance at the World Economic Forum Annual Meeting in Davos this month. President Xi Jinping joined a roster of presidents, prime ministers, central bankers, executives and other officials from around the world at this prestigious event, which carried the theme this year of “responsive and responsible leadership.” With China at center stage, I thought it might be appropriate to talk about an aspect of China’s economy that I think many people misunderstand: so-called “shadow financing” or “shadow banking,” which is said to be a significant contributor to China’s growth rate. In simple terms, shadow financing refers to activities outside the formal banking system that perform similar functions. Shadow banks can make financial services (namely loans) more widely available to the public, but since they are not subject to the same regulations, there is concern about the risk they pose to the financial system. The growth of shadow financing is reflective of an overall boom in consumer-oriented products and services in China. The consumer sector in China is one we are excited about in general.

A changing world

24 January 2017

The victory of Donald Trump in the US presidential election took the market by surprise. Market behaviour suggests that while Trump’s victory was unexpected by investors, it was not unwelcome, as US share prices and the dollar appreciated.

Ratings reprieve for South Africa, but there is work to be done

06 December 2016

After a tense period in which the three major global ratings agencies assessed the local economy, government policy and more, South Africans can head into the festive season feeling a bit more at ease, knowing that the country has maintained its investment grade rating. The third major ratings agency, S&P Global Ratings, left the foreign currency rating unchanged at BBB- with a negative outlook. S&P cut South Africa’s local currency rating by a notch to BBB, bringing the local and foreign currency ratings closer together.

quick poll

Question

If you had to hazard a guess, when do you reckon the COFI Bill will be signed into law?

Answer

2026, as promised 2027 looks more likely Impossible to say More consultation needed

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