The past week saw the first glimmers of hope that the new administration has the political will to act against corruption. The National Prosecuting Authority (NPA) announced that processes are underway to recover R50 billion worth of assets acquired through corrupt activities, while the ANC’s National Executive Committee (NEC) instituted steps to remove former party leader Jacob Zuma as the country’s president. The markets reacted positively to the news.

Further good news is that the monetary policy committee (MPC) of the SA Reserve Bank (SARB), at its first meeting for the year, decided to leave the repo rate unchanged at 6.75%. The repo rate is the interest rate at which the SARB lends money to commercial banks. Following the SARB’s decision, the prime lending rate will remain at 10.25%.

The positive political news and the stable interest rates supported the rand and the currency strengthened to R12.23 against the US dollar. The rand strengthened by more than 10% since the announcement that Cyril Ramaphosa had been elected as the new president of the ANC. This paints a clear picture of the risk associated with the leadership of Jacob Zuma.

Local equity markets followed the international trend upwards to close at 60 912 points, 1.39% higher for the week and a solid 2.44% higher sins the start of the year. Over the first three weeks of 2018, the local markets were driven by the resources sector, with a return of 7.27%. The industrial sector returned 3.18% for the same period. The financial sector gave back some of its December gains, with a 1.83% negative return for the year so far.

International markets started the year with a boom. In the US, the S&P returned 5.11%, while China’s Shanghai Composite Index returned a massive 5.46% for the year so far. Other world markets followed the lead of these two prominent markets and recorded returns in excess of 4%, with the exception of the UK market, which achieved only 0.56% for the year to date.

We will continue to monitor local and international political and economic happenings as Deputy President Cyril Ramaphosa and the SA delegation attend the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, this week.

Johan Steyn

Regards,

SECURITAS – Wealth Management