Category Archives: international

July 19, 2011

Rand weakens as major currencies gain ground

By *media update*

Johannesburg. The South African rand weakened against major currencies, as investors shield away from risky assets.
“The last two days have seen the rand trading weaker on worries about poor performing European banks and fears about US credit ratings.

The rand will be unlikely to weak any further from here. We expect the rand to remain in the range we set which is between 6.60 and 6.97,” said Chris Hart, Chief Strategist of Investment Solutions.
The strike by steel, engineering and energy workers has also being weighing on the rand. “I think there’s still a lot of investment merit for investment inflows to come in South Africa as conditions deteriorates in developed economies,” said Hart.
The rand fell almost 1 percent this week. The South African currency was trading at 6.90 to the US dollars from 6.85 from previous day’s close. Pound Sterling was at 11.11 after touching 11.04 on the previous day’s session. The euro was costing 9.75 rand from 9.71 rand. The dollar was softer against the Japanese Yen at 79.10 from 79.12.

On the capital market, bonds are flat, with the yield on the R157 government bond at 7.45 per cent from 7.48 per cent Thursday. (Xinhua)

Article courtesy of The Citizen – please click here to see the original article

Leave a comment | posted in bonds, currency, international, investment, labour

May 15, 2011

Wal-mart probe spooks foreign investors

By *media update*

Government intervention in local business transactions is creating the impression that SA is a difficult investment destination.

The Competition Tribunal this week heard arguments about Walmart’s planned 51% takeover of Massmart, after government intervention stalled the takeover process.

However, some policymakers and economists say it is relatively easy for overseas companies to invest.

Lionel October, the Department of Trade and Industry’s director-general, denied that government was making investment difficult.

“We welcome any investment which will expand domestic production and create jobs here. We don’t want investors to come in, close down SA plants and bring in imported products.”

October said the government had incentivised multinational vehicle makers to invest R12-billion in the country to produce cars. It also negotiated a deal with General Electric to manufacture in SA. “In two weeks’ time we have 60 Chinese companies coming to SA to assess opportunities.”

October said the benefits were not immediately obvious in the case of a retailer.

“The retailer can source from anywhere. That’s why America has such a big trade deficit. They use Chinese suppliers.

“What we want unashamedly to do is help domestic production. Whether you’re local or foreign doesn’t matter. The only condition we want is that Massmart will continue the practice of using SA suppliers and not shift elsewhere,” said October.

Stephen Gelb, economics professor at the University of Johannesburg, said it is easy for foreigners to enter SA.

“The SA policy framework is largely laissez faire regarding the entry of foreign firms.”

Gelb said policy interventions do not discriminate between domestic and foreign investors.

“No official approval is required except in a few sectors such as banking. Foreign investors are subject to the same laws and regulators as domestic investors.”

But Gelb questioned the use of competition authorities to screen foreign investment.

“They should be used to look at competition. If you use them to look at other things it undermines their credibility. We have an effective competition regime. We should be protecting that quality, not undermining it.”

Azar Jammine, economist at Econometrix, said SA could not afford negative perceptions created by the Walmart hearing.

“SA might not need foreign capital right now as money is still pouring into our equity and bond markets from abroad.

“But from a longer-term perspective the damaging perception becomes costly. The lion’s share of money coming in is of a portfolio investment kind and helps us survive, but it’s not creating jobs.”

Chris Hart, economist at Investment Solutions, said the apparent xenophobia to foreign capital can be costly for SA, especially when there is no “plan B” for economic growth and employment creation.

He said that given SA’s lack of savings, which would normally be used to pay for growth, meant the country desperately needs foreign investment.

Analysts warned against the risk of mixed messages should conditions be imposed on the Walmart deal.

“On the one hand the government keeps saying they want to attract foreign investment, but on the other hand they seem to be terrified of the implications of what that might mean,” said one.

Uncertainty is being created by having different rules for each attempted transaction by a foreign entity, said Neren Rau, CEO of the SA Chamber of Commerce and Industry.

Francois du Plessis, portfolio manager at Vega Capital, said if foreign companies encountered problems investing in SA they could turn to other emerging markets.

Du Plessis said that apart from the costs of undertaking a due diligence, preparations for a takeover also take up a lot of management time.

“I am sure someone like Andy Bond (former Walmart vice-president who represented the group at this week’s hearings) has 110 better things to do than sit here and explain why they want to invest in SA.”

Gelb said every foreign investment has costs and benefits for the economy – the big benefit for Walmart coming into SA would probably be consumer welfare.

Article via Business Live – click here for original article

Leave a comment | posted in economic growth, international, investment, politics

May 4, 2011

No fundamental changes after Osama’s death

By *media update*

As global markets enjoy a sudden surge in the wake of Osama bin Laden’s death, analysts have predicted nothing to change in the long run.

NICKOLAUS BAUER

A day after the world woke up to the news that al-Qaeda leader Osama bin Laden was killed, many have observed that fundamentally his death is of little significance.

Bin Laden was killed by US forces on Sunday in Abbottabad Pakistan, some 60km from the capital, Islamabad.

It was hailed as a “victory for America” and “a great day for the US” by US President Barack Obama.

He was joined by countries the world over, from Russia to Spain in greeting the news with glee and hopes that it would aid the fight against terrorism.

Although slightly muted at first, our own government was candid about their stance on the death.

The department of international relations and co-operation (DIRCO) released a statement to Business Day noting bin Laden’s demise and reiterated “South Africa’s commitment to fight terrorism in all its forms”.

All of this happiness is surely to be expected as bin Laden had been the world’s most wanted man since claiming responsibility for masterminding the September 11 terror attacks in 2001.

MORE OF THE SAME POLITICALLY

Concrete improvements to the global terrorism outlook as well as relations between Muslims and the rest of the world has been much talked about with little to no optimism of any fundamental changes.

“This is a massive symbolic victory for the US but will it really change things on the ground?” Professor Adam Habib, political analyst and Deputy Vice-Chancellor at the University of Johannesburg asked.

Habib told Business Day that while bin Laden’s demise may prove to be a morale booster for the US and its allies, it will do little in the way of changing the threat of terrorism and perspectives of Muslims in the world.

“This is not going to change the game-plan, it won’t alter US and Muslim relations and there is a real danger that al Qaeda will want to prove it is still alive and well,” Habib said.

GLOBAL MARKETS PULL BACK

Stock markets worldwide have also felt the apparent euphoria subside, with most major gains made yesterday on the back of bin Laden’s death being snuffed out in Tuesday trade.

US stocks fell at the open on Tuesday with the Dow Jones industrial average was down 17,03 points, or 0,14%. This after gaining slightly on Monday after the news of bin Laden’s execution broke.

The dollar offered the most movement on Monday, with the greenback rising to ¥81,66 and $1.4764 to the euro before retreating later in the day.

Commodities were also not immune to the movements in the market.

Gold slipped on Tuesday from record highs above $1570 an ounce.

The precious metal was trading at $1540,07 an ounce by 1216 GMT, having hit a record $1575,79 an ounce on Monday and compared with $1544,30 late in New York on Monday.

Spot silver also hit a near two-week low of $42,58 an ounce on Monday, when the precious industrial metal saw its biggest one-day drop in 29 months.

“This pullback was temporary and nothing more than a small pause and consolidation. Markets have been running hard for some time and Osama bin Laden’s death does not change anything in the market,” Chris Hart, chief economist at Investment Solutions, told Business Day.

“It can all be put down to sentiment and the junkies just got a nice shot of good news,” Hart added.

WHAT NEXT?

Despite the apparent economic indifference in the aftermath of bin Laden’s death there is still fears that al Qaeda’s next move will determine where the markets travel.

It is thought that long-time member and bin Laden confidante Ayman al-Zawahiri will soon be appointed as the organisation’s new leader, and that revenge attacks may follow.

As such the US state department issued travel warnings to all Americans abroad and beefed up security at all international embassies.

The US is also not only country stepping up measures to ward off terrorist attacks. Five men were detained Monday close to a nuclear power plant in north-west England on suspicion of terrorist activities.

The men, all aged in their 20s, were from London and had been arrested after a stop check on their vehicle close to the Sellafield nuclear plant.

“The stories surrounding bin Laden had faded, so if this thing were to spark a resurgence in al Qaeda then the world and its markets would take note,” Monale Ratsoma, chief economist at Thebe Securities told Business Day.

“It all depends on what happens next, the market will always look for direction and if acts of terror are the order of the day, we will all feel the impact,” he added.

Article via Business Day – click here to see original article

Leave a comment | posted in commodites, international

May 3, 2011

JSE likely looking at strong start to new week

By *media update*

The JSE is likely looking at a strong start to the week in the wake of the buoyancy in global markets following the news of the death of al-Qaeda leader Osama Bin Laden.

Market analysts are even predicting that the local bourse could test new highs this week.

But they caution that it all depends on how the US markets end overnight.

“I think we’re looking at quite a strong start on the JSE tomorrow. But obviously, however, it will depend on how the US markets end,” Investment Solutions economist Chris Hart told I-Net Bridge/BusinessLIVE on Monday.

“Our market lagged a bit last week, languishing because of all the holidays. But I think there will be some serious buying when the market reopens tomorrow and we’re looking for it to break through to new highs,” Hart added.

Dow Jones Newswires reported that US stocks were expected to open moderately firmer Monday. US President Obama’s dramatic announcement that Osama bin Laden had been killed by a joint US and Pakistan military operation gave a strong lift to risky markets earlier and whilst the effect of this has faded somewhat, front-month US stock futures remained firm, the news agency said.

It reported that Asian markets ended mixed Monday, with news of Osama bin Laden’s death boosting sentiment, helping Japanese and South Korean stocks to extend gains and pulling Australian shares off five-week lows.

The news added to gains in the U.S. dollar and the U.S. index futures, in addition to spurring Asian stocks.

“This doesn’t mean terrorism will come to an end, but it’s a positive trading incentive since the manhunt has been going on for more than a decade,” said Kazuhiro Takahashi, general manager at Daiwa Securities in Tokyo. He added, buying on this news will likely be short term as attention shifts back to the state of the U.S. economy.

Japan’s Nikkei Stock Average climbed 1.6% to 10,004.20, reclaiming the 10,000-point level for the first time since March 14, while South Korea’s Kospi added 1.7% to 2228.96. Australia’s S&P/ASX 200, which was down more than 1% at one point, erased losses to finish little changed at 4825.30.

Dow Jones Industrial Average futures were recently up 90 points in screen trade.

Markets in China, Hong Kong, Singapore, Malaysia, Taiwan, Thailand and Vietnam were shut for a public holiday.

Trade was thin in Japan with many investors away for the Golden Week holidays. Tokyo markets will be shut from Tuesday and will reopen Friday.

In Japan, the yen weakened on news of bin Laden’s death, spurring shares of exporters. Canon Inc. and Sony Corp. each climbed 2.5%, while Advantest Corp. and Komatsu Ltd. added 3.0% each.

Panasonic Corp. climbed 2.8% after announcing cost-cutting plans.

Mizuho Financial Group Inc. rose 3.1% after unveiling the exchange ratios for turning group companies into wholly owned subsidiaries; Mizuho Securities Co. lost 5.9%.

Australian shares hit a five-week low during the session as the Australian dollar rallied to a 29-year high. But the market recovered on news of bin Laden’s death.

“The short-term reaction looks positive, but it’s hard to know how the markets will ultimately react (to bin Laden’s death),” said IG Markets institutional dealer Chris Weston.

Article via Business Live – please click here to see original article

Leave a comment | posted in international, markets

March 12, 2011

Chinese trade data shock spooks markets

By *media update*

JSE drops the most in almost 10 months as China reports its biggest trade deficit in seven years

RON DERBY

THE JSE dropped the most in almost 10 months yesterday as poor export data from China and a Spanish downgrade heightened fears that a global economic recovery — already threatened by surging oil prices at two-year highs — could falter.

There were still jitters in the markets, Investment Solutions chief economist Chris Hart said.

China reported its biggest trade deficit in seven years yesterday, with its export growth the slowest since February last year.

The sell-off was also fuelled by Moody’s Investors Service’s downgrade of Spain’s credit rating ahead of a European Union leaders’ meeting today.

China “has been the last hope for world growth”, RMB Asset Management portfolio manager Patrick Mathidi said yesterday. The country’s trade deficit numbers “spooked markets” .

China’s exports, which have become a gauge of global economic activity, suffered a larger than expected effect from the lunar new year holiday.

The JSE’s all share index fell 2,9% — its biggest drop since May 20 last year. At 30898,94 points, it was at its lowest level since December 1. The index has now dropped 6,6% from its record high reached on February 14.

European stocks declined yesterday to their lowest levels since January. Miners such as Anglo American and BHP Billiton led the sell-off, falling 4,1% and 3,2% respectively. China is the world’s biggest consumer of copper, which accounts for a significant amount of the two companies’ earnings.

Copper, which also reached a record high on February 14, fell 1,7% in London.

“The disappointing economic news out of China is the single biggest bad news of the day,” Wayne McCurrie, a portfolio manager at RMB Asset Management, said. “Without China, there is no growth in the world, as the major developed economies, with the exception of Germany, are all bankrupt.”

The data came “in an environment when there are already concerns about growth because of oil”, Mr Mathidi said.

Antigovernment protests in oil- producing North African and Middle Eastern countries have caused oil prices to rise beyond 100/barrel for the first time since 2008, before the global financial crisis .

Brent crude for April delivery fell more than 2% on global growth fears.

Moody’s downgraded Spain’s sovereign rating. The agency said it underestimated the eventual cost of Spanish bank restructuring and the country failed to gain enough control over the budgets of its 17 “autonomous” regions .

The rand weakened 0,7% to R6,90/$ from R6,86/$. Mr Hart said despite the global sell-off, “investors still see good prospects for emerging markets”. with Bloomberg

article courtesy of Business Day – please click here to see original article

Leave a comment | posted in international

March 5, 2011

China’s market bubble may burst

By *media update*

The performance of China’s stock market in recent months may be an early warning sign of trouble ahead, according to Chris Hart, the economist at Investment Solutions. At a presentation in Johannesburg yesterday he spoke of the dangers presented by bubbles in financial markets.

He pointed out that China’s Shanghai composite index, which tracked global stock markets closely for most of last year, had started to diverge sharply – possibly a sign the market sees a bubble about to burst. China’s economy, which has been driving global growth, is at risk from overheating.

Last year its gross domestic product was up more than 10 percent. And fears about rising inflation have prompted official measures to moderate growth. Inflation climbed to 4.9 percent in January from 4.6 percent the previous month.

Against this backdrop, Hart said China’s growth “could take a dip” at some time in the future. And its role as the engine of growth for the global economy could be overtaken by other emerging economies, including Turkey, Colombia, Chile and “even South Africa”.

Hart said the wave of liquidity generated in the US and Japan would continue to flow into emerging markets. Both countries have interest rates close to zero and in addition have pumped cash into their economies to keep them from shrinking. “The system is awash with liquidity. And when you see a tidal wave of liquidity coming for you get out your surf boards and enjoy it.”

“But be sure to get off in time.” And he warned that the bull market might “decay sooner” than it did in the previous cycle because of the length of time it took for monetary stimulus to kick start recovery.

The impact of the global flows was seen last year when emerging market currencies, including the rand, were boosted by the wave of money coming in. Hart said high levels of liquidity would continue to determine investment decisions. But he predicted investors would diversify further as their focus switched from emerging market bonds into global equities generally.

“We may be heading for a tremendous run on the JSE and also a tremendous run on the rand.” But he warned that the relative attractions of local stocks are waning and the rand would eventually “snap back”. He said: “From an asset management point of view the right strategic move is off shore because our markets do not offer the same opportunities and the rand is looking overvalued.”

Commenting after the presentation, he said the average price:earnings (p:e) ratio of stocks in the US was at about 17, compared with the five-decade average of 19. In contrast, locally the p:e ratio is 15.3, which is above the 12.5 average over five decades. The ratio, sometimes referred to as a multiple, is the share price divided by earnings and it shows what investors are willing to pay per rand of earnings. When the ratio is too high the share appears overvalued.

Despite the prospects of good growth in countries such as China and India, Hart advised against investing in dedicated funds. He said a better course was investing in large multinationals with good exposure to emerging markets which also provide the benefits of investments elsewhere. – Ethel Hazelhurst

Article courtesy of Business Report – please click here to see the original article

 

Leave a comment | posted in economic growth, international, investment

March 3, 2011

SA’s bonds face headwinds: Investment Solutions

By *media update*

South African bonds as an asset class were starting to “face headwinds”, according to Chris Hart, chief strategist at Investment Solutions.

Hart said equities were now looking more attractive for investors.

“That’s [equities] where I think the opportunities are. One needs to be in equities,” he said.

Foreigners have mostly been the net sellers of local bonds during January and February. Latest data showed that foreigners were net sellers of 322.951 million rand of South African bonds including repo transactions on Tuesday.

Hart said bonds were overvalued and that equity markets were starting to gain traction.

“Markets are gaining traction and they could go on to test the highs of 2007,” Hart said, and added that this could happen as soon as this year.

According to Hart, SA could be heading for a “tremendous run” on the JSE in 2011.

Hart also advised investors to move their money offshore but to do so with the help of experienced asset managers with exposure in many markets worldwide.

Article courtesy of Business Live – please click here to see the original article

 

 

Leave a comment | posted in international, investment

February 23, 2011

Mayhem in Libya lifts oil prices to 2-year high

By *media update*

SA motorists may pay 40c/l more as unrest threatens global supply

SISEKO NJOBENI and RON DERBY

VIOLENCE in Libya yesterday sent the oil price soaring to a two- year high, as Libyan leader Muammar Gaddafi’s crackdown on dissent left hundreds dead and raised concern about security of supply from the North African state.

Gold also rallied on investor jitters, rising for a sixth day to more than 1400 an ounce.

Uncertainty about the political future of North Africa and the Middle East sent the price of silver to a 31-year high and palladium to its highest level in 10 years. Brent crude rose by more than 5,6% to a post-2008 high of 108.

Libyan security forces attacked protesters as unrest spread in a bid to oust Mr Gaddafi, the world’s longest-serving ruler, who came to power in a coup in 1969.

Libya, a member of the Organisation of Petroleum Exporting Countries, has Africa’s largest oil reserves and the ninth- largest in the world, estimated at 41,5-billion barrels.

Last night, residents reported gunfire in parts of Tripoli and one political activist said warplanes had bombed the city.

Forces loyal to Mr Gaddafi had killed dozens of people across the country, human rights groups and witnesses said, prompting widespread condemnation from foreign governments.

European countries sent planes and ferries to Libya to evacuate citizens, and some oil and gas companies pulled their foreign staff out and halted operations.

The surge in oil is bad news for South African consumers. Combined with a weakening rand, there is little protection against a large petrol price increase next month, analysts said.

Chris Hart, an economist at Investment Solutions, said unrest in the Middle East was a double blow for countries such as SA.

“It creates a bit of investor scepticism, leading to a weaker currency. It has also boosted international oil prices.

“It is not great that the rand is weakening at the same time as rising oil prices. At least last year we had a strong rand to counter the effect of rising oil prices.”

Mr Hart said he expected petrol prices to increase by about 40c/l next month.

The Central Energy Fund’s update of the basic fuels price shows that the average petrol price underrecovered by between 37,2c/l and 34,9c/l between January 28 and last Friday. The wholesale price of diesel under- recovered by as much as 60c/l .

Elize Kruger, of KADD Capital, said consumers faced steep rises in fuel prices early next month.

“The expected increase of 60c/l in the diesel price and 33c/l for petrol could be ascribed to oil price movements that can directly be linked to the Middle East tension,” Ms Kruger said.

“I estimate that 55% of the expected increase in the diesel price is linked to the Middle East tension, while the other 27c/l or 45% is due to the depreciation in the rand exchange rate.”

The surge in the oil price would increase SA’s inflationary pressures, Jeff Gable, Absa Capital economist, said yesterday.

“It’s safe to say that if nothing changes, there will be at least a 40c/l increase at the pump next month,” he said.

Gold rose to a seven-week high as a hedge against market volatility and rising oil prices.

Platinum, which along with bullion accounts for about a fifth of SA’s exports, increased 0,4% to 1851.

Silver for immediate delivery gained as much as 2,7% to 33,5175 an ounce, the highest price since March 1980.

Fitch cut its credit rating of Libya by one notch to BBB yesterday and said it may reduce it further, particularly if oil production in the country was disrupted further. Libya exports about 1,1- million barrels a day and output had been affected by workers striking in sympathy with the antigovernment protestors.

Fitch said escalating violence and the lack of a political resolution would probably prompt a further downgrade.

Antigovernment protests reached the Libyan capital for the first time yesterday and several cities in the east seemed to be in the hands of the opposition.

SA’s government yesterday called on all parties in the Libyan conflict to exercise restraint in order to prevent further loss of life. “The government calls on all South Africans in Libya to maintain contact with our embassy in Tripoli. Ambassador M Dangor is co-ordinating consular assistance to our people in Libya,” Department of International Relations and Co-operation spokesman Clayson Monyela said yesterday.

The US government yesterday ordered all nonemergency personnel to leave Libya. With Reuters, Bloomberg

Article courtesy of BusinessDay – please click here to see the original article

Leave a comment | posted in commodites, currency, international, politics

November 22, 2010

Ireland – printing money is not going to help

By *media update*

As Summit TV reports, according to chief economist at Investment Solutions Chris Hart, bailing out Ireland is only half the story…

Investment Solutions analyst Chris Hart says the Irish bank bailout planned by the EU and IMF is not going to ensure economic stability in Ireland.

“When we look at Ireland for instance the property market is still in decline – in other words collateral backing of their banking system is still deteriorating,” he told the Business Channel.

“In Spain the property market is yet to deteriorate – they haven’t dealt with it yet because the property that’s sitting on their banks books is still sitting at full price – there’s still going to be a few write-offs – and in the US it looks like a double dip is actually busy unfolding in the property market with those prices starting to dip again,” he warned.

“With the foreclosure mess effectively there are more losses built into the system bail-outs or not so it looks like the financial sector talking global probably needs another re-capitalisation and that’s going to be extremely difficult because quantitative easing, printing money and bailing out banks have become politically toxic.”

He says the printing of money or “quantative easing” is initially easy to manage.

“You print it. That’s not difficult. The leprechauns gather them around and wave their magic wands and boom there’s money – you ask the fairy godmother in the European Central Bank to come along and print the money and there’s the money. The problem is the solutions are not easy and they can be destabilising in their own right.”

As capital flows from the developed world into the 3rd world, Hart says there could be a growing problem for the local maret.

“We are already seeing a desperate search for yield in the developed world. That’s what started the sub-prime problem is AAA rated paper effectively turned out to be toxic giving a yield pick-up in a very low yield environment,” he said.

“The yield environment is even lower now and the search for yield is starting to go into the emerging sovereigns and the flow of funds basically gets magnified with each tranche of quantitative easing that we get – whether that’s overt or covert it doesn’t really matter. It’s quite possible when we get to January the rand is around 6.40 or 6.50 against the dollar.”

“What happens when we get to the middle of next year and the rand is at six against the dollar and the inflation rate is still subdued and growth is still sluggish? They might cut again.

Article courtesy of Business Day – click here to see original article

Leave a comment | posted in household, inflation, international, monetary policy

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