I have been on the road across the major cities of South Africa for the past two weeks talking to some of the more than sixteen million members of pension funds, who collectively own R4.3 trillion in retirement funds. These members are the real investors as they ultimately own the funds invested by various asset managers on their behalf, and they are worried.  ...

This week National Treasury borrowed US$5 billion (roughly R75bn) worth of bonds from international capital markets, with US$2 billion maturing in 2029 (10-year) and US$3 billion maturing 2049 (30-year). This is the biggest ever euro bond the country has issued, which Treasury has interpreted to mean that it’s a show of confidence on South Africa, and I agree in part. Raising funding has never really been an issue, it is the price of that debt that matters. Those outside financial circles have been talking and mostly bemoaning why Treasury is pilling on foreign debt when it needs to reduce it. ...

There is a false sense of comfort that has swept through the political and part of the financial circles following Moody’s comments that there is a low probability of a credit rating downgrade over the next 18 months. A credit rating downgrade was never a high probability in 2019 but a change in outlook from stable to negative was. That has not changed, I believe Moody’s will likely change the outlook to negative from stable on 1 November. Here is why.    ...

Some commentators have boldly predicted that the rand will likely weaken to 60 to the US dollar or more simply, that the rand will crash, and that South Africa is closer to approaching the International Monetary Fund (IMF) for a bailout due to the current bleak economic prognosis. ...

For emerging markets policy makers spanning central banks and finance ministries, and those that manage funds, understanding the impact of US trade tariffs on markets has become more crucial since the US trade wars versus the rest of the world started in early 2018.  ...

We are entering into what seems to be a synchronised interest rate cutting cycle over the next year, except for China and Norway, which are expected to hike rates out of 19 countries. Experience over the past decade when quantitative easing was in full force with interest rates at the zero or lower bound in major economies is that many countries, especially emerging markets, went on a borrowing spree in hard currency. When the US Federal Reserve signalled and eventually started to raise rates, the debt servicing costs started to chock economic growth.  ...

The global monetary policy expectations have shifted towards interest rate cuts in 2019 from expecting a pause earlier in the year and hikes as recent as December 2018. This week the U.S. central bank (Fed) kept its targeted interest rates unchanged between 2.25% and 2.50% and gave its strongest indication post the financial crisis rate, that it will likely cut rates due to increasing uncertainties about the outlook for economic growth, labour markets and inflation. The shift from patience in assessing incoming economic data to inform the appropriate policy action signals that the Fed will likely cut rates at its next meeting scheduled for 30-31 July, if not, at the 17-18 September, the latter of which is associated with the release of a summary of its economic projections to justify the move.   ...

Major global central banks have pivoted on supporting economic growth since the beginning of this year due to concerns about the weaker economic growth outlook. The International Monetary Fund, the World Bank and the OECD among other bodies have all reduced growth forecasts for 2019. The primary culprit is U.S. President Donald Trump’s trade policy - a technology war unleashed against China in the form of trade tariffs disguised as protection against China’s threat to U.S. security. As we have recently discovered, no country is safe from attack as long as there is trade diverted through it into the US: Mexico and India are the latest to receive threats of higher tariffs. ...

The South African Reserve Bank’s Monetary Policy Committee (MPC) kept the policy repurchase rate unchanged at 6.75% at the conclusion of its meeting yesterday. Its inflation forecast has slightly improved to 4.5%, 5.1% and 4.6% in 2019, 2020 and 2021 from previous forecasts of 4.8%, 5.3% and 4.7%, respectively. Core inflation has also improved to 4.5% and 4.8% in 2019 and 2020 from 4.8% and 4.9% at the last MPC meeting; the forecast for 2021 remained unchanged at 4.5%. The balance of risks is assessed to be balanced. ...