Closing the loop 06 June 2023

Closing the loop

Shireen Darmalingam

Market highlights:

The rand is stronger at R19.27/$ (R19.29/$*) today; it ranged between R19.17/$ and R19.35/$.
The currency is above its 50-day, 100-day and 200-day moving averages (R18.67/$, R18.31/$ and R17.91/$).
EM currencies are mixed today; the COP (+0.7%), BRL (+0.2%) and IDR (+0.2%) were the biggest gainers; the TRY (-1.2%), RUB (-0.9%) and THB (-0.7%) were the biggest losers.

The rand strengthened for a fourth consecutive day against the dollar today as data confirmed that the SA economy has avoided a recession despite the electricity crisis.
GDP registered in line with expectations in Q1:23 increasing by 0.4% q/q (sa) after having contracted by a revised 1.1% q/q (sa) in Q4:22.
The improvement comes on the back of a rebound in the mining and manufacturing sectors, which accounts for about 20% of GDP.
Eight industries recorded positive growth in Q1:23; the construction, transport and personal services industries also reflected resilience in Q1:23 despite the record loadshedding during the quarter.
The finance, real estate and business services industry increased by 0.6% in the first quarter, after contracting in Q4:22.
The agricultural sector contracted in Q1:23 and subtracted 0.4 percentage points from growth during the quarter.
Household consumption increased by 0.4% q/q in Q1:23 and contributed 0.3 percentage points to total growth.
Gross fixed capital formation increased by 1.4% q/q in Q1:23 and contributed 0.2 percentage points to total growth.
Net exports were a drag on growth in Q1:23, subtracting 0.2 percentage points.
On a y/y basis, GDP was up by 0.2% in Q1.23 from a downwardly revised increase of 0.8% in Q4:22.

The SARB commented on the risk of a blackout today in prepared remarks to Parliament’s standing committee on finance on its latest financial sustainability review.
The SARB noted that while a grid collapse is unlikely, it is not impossible; the bank noted that it has a contingency plan for such an eventuality.
The bank noted that this would include shutting down the markets.
SARB Governor Lesetja Kganyago said that loadshedding and unscheduled breakdowns impeded the domestic financial system’s ability to operate as it should.
Eskom: Stage 3 loadshedding is currently in place and will continue until midnight with no loadshedding scheduled thereafter until 4pm tomorrow.
Eskom has indicated that the schedule is subject to rapid change at short notice.

The IMF noted today that the SA economy “is facing mounting economic and social challenges”.
The IMF expects GDP growth to come in at 0.1% in 2023; the Fund noted that the forecast reflects a significant increase in the intensity of loadshedding, weaker commodity prices and external environment.
Over the medium term, the IMF expects growth of about 1.5%.

The Central Bank of Poland kept its benchmark interest rate unchanged at 6.75% today.
The decision to keep rates on hold comes as inflation slowed for three consecutive months.
Polish policymakers are now positioning for a possible rate cut later this year.

Brent crude oil is at $75.93/bbl ($76.71/bbl*).
Gold price is at $1960/oz ($1958/oz*).
SA CDS is at 288bps (286bps*), Brazil 203bps (202bps*), Turkey 496bps (503bps*).
Yields: US 10yr 3.72% (3.68%*), German bund at 2.37% (2.38%*) and SA 10-year generic at 11.80% (11.90%*), SA’s R2030 is at 10.99% (11.09%*).
The JSE ALSI is down by 0.1% today (-0.7%*).

* Denotes yesterday’s close.

Key events and data:

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