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Thu Oct 23 16:26:17 SAST 2014

The Good ...No action to weaken the rand even though global 'currency war' looms

Business Times | 17 October, 2010 00:000 Comments

SA will not take unilateral action to weaken the rand, Treasury director-general Lesetja Kganyago said on Friday. Taxing foreign inflows would not curb the currency's gains, he added.

The rand has gained more than 28% since the beginning of last year, mainly due to capital flowing to emerging markets offering higher yields than the near-zero interest rates and weak growth in developed economies.

Emerging markets such as Brazil and Thailand are taxing foreign inflows to stem rises in their currencies. Kganyago said a multilateral approach was more appropriate as currency appreciation was a global phenomenon that should be discussed at a forum such as the Group of 20 leading nations.

  • The trade climate turned positive in September, the SA Chamber of Commerce and Industry said. Releasing its monthly Trade Conditions Survey, it said the September index of 51 was a considerable improvement on the 45 of August 2010, but one point lower than the figure of September 2009.

All the components of physical trade activity (excluding prices) improved last month, with a marked increase in sales volumes from 50 in August to 59 in September.

  • Datatec said a strengthening recovery in the US and continued growth in emerging markets helped it to post a rise in first-half underlying earnings. Chief executive Jens Montanana was generally optimistic about the IT sector although he said it was still fragile in places.

Datatec, which is a major re-seller for networking giant Cisco Systems, saw robust top-line growth in the US, its largest market, and stable growth in Europe, although the UK remained challenging, Montanana said. Emerging markets were strongest and now contributed a third of revenue, he said.

  • Despite a "relatively sluggish trading environment", human capital management group Adcorp's interim results showed a 4% increase in headline earnings.

Mining production increased by 10.4% year on year in August 2010, compared with a 0.5% increase in July 2010, Statistics SA said.

The main contributors to the 4.1% increase were platinum group metals and coal.

  • Foreign capital inflows into the South African economy are expected to persist for some time, the SA Reserve Bank said. This should keep the rand strong and help to contain inflation, it added.

The bank has cut interest rates by 600 basis points since December 2008 and will next meet on November 17-18.

The Bad

Finance Minister Pravin Gordhan said the world was heading towards a "currency war" unless developed nations gave ground in negotiations at the Group of 20 finance ministers and central bankers.

"Unless the G20 takes on the responsibility of getting major players to sit around the table to find a spirit of co-operation and generosity ... we are heading for what Mr (Guido) Mantega, the finance minister of Brazil, correctly called a currency war," Gordhan told a parliament finance committee.

A meeting is scheduled for Seoul next week ahead of a summit on November 11-12 to try to reconcile differences over deep imbalances in the global economy and reduce the risk of such a currency conflict.

  • Stanlib Asset Management has joined a growing list of minority shareholders questioning ArcelorMittal SA's controversial offer of a 26% stake to the Ayigobi consortium, whose directors are linked to senior politicians.

Other minority shareholders, including RMB Asset Management, the Public Investment Corporation and Sanlam are opposed to the BEE deal.

  • Foreigners sold R1.802-billion worth of bonds in the week ending October 8, and were net buyers of a mere R70000 worth of equities, according to the JSE.
  • Manufacturing output growth slowed in August and was below expectation as strikes in the sector took their toll, according to data from Statistics SA.

Factory production contributes about 15% towards gross domestic product but has struggled to recover as consumer demand remains depressed. Manufacturing production grew by 5.3% year on year in August versus 7.2% in July.

  • Growth in South African retail sales slowed unexpectedly in August, highlighting subdued demand from indebted consumers and the end of the World Cup impact. Retail sales rose 4.6% in August from a year ago, after an 8% increase in July.
  • Restrictions on genetically modified (GM) maize imports in some countries have weighed on SA's ability to access markets for the grain, said Jethro Mbau, chairman of agricultural service group Afgri.

Despite the need for more food, some African countries have banned GM imports, fearing they could be harmful.

SA, the world's eighth-largest producer of GM crops and Africa's biggest, has experienced rapid growth in such crops since it started growing GM farm produce in 1998.

The Week Ahead

MONDAY OCTOBER 18

JOHANNESBURG - African Oxygen and WBHO shares go ex-dividend

TUESDAY OCTOBER 19

SYDNEY - Minutes of monetary policy meeting of Reserve Bank board

LUXEMBOURG - European Union economic & financial affairs council meeting

FRANKFURT - European Central Bank conference addressed by bank president Jean-Claude Trichet

OTTAWA - Bank of Canada policy interest rate announcement

WEDNESDAY OCTOBER 20

WINDHOEK - Bank of Namibia announces decision on interest rates

JOHANNESBURG - AVI AGM

CAPE TOWN - Pick n Pay Holdings interim results

LONDON - Bank of England publishes minutes of October 6-7 monetary policy committee meeting

WASHINGTON - Federal Reserve releases Beige Book survey of US economic conditions

THURSDAY OCTOBER 21

JOHANNESBURG - Clicks Group annual results; DRDGold interim results; Implats AGM

SYDNEY - Reserve Bank of Australia bulletin

FRANKFURT - European Central Bank governing council meeting. No interest rate announcement expected

OTTAWA - Bank of Canada monetary policy report

FRIDAY OCTOBER 22

JOHANNESBURG - Aveng AGM

GWANGJU, South Korea - G20 finance ministers and central bank governors meeting (to October 23)

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The Good ...No action to weaken the rand even though global 'currency war' looms

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