Business

5 things you need to know before the JSE opens today

Staff Writer

 ·27 Jan 2016

Here’s what’s happening in the markets:

• While the South African Reserve Bank is expected to meet on Thursday (28 January) to discuss a rate hike, business cycle indicators from the central bank showed that South Africa would be lucky if it avoided recession this year. Indicators reveal a struggling economy that won’t push past 1% growth. Low commodity prices, low business confidence and slow demand for emerging market economies paint a dismal picture for South Africa.

• South Africa’s credit rating, for the time being, is still above junk status – however, bond markets are not waiting for the downgrade, and the cost of insuring SA government bonds is now just as expensive as countries who have fallen into junk status. This indicates that bond markets see the downgrade as inevitable.

• South Africa is seeing an acceleration in capital flowing out of the country, as investors bail on emerging markets. JSE indicators show that almost R20 billion in capital has flowed out of the country, year to date. While this is a trend seen in all emerging markets, South Africa has some unique local factors at play: policy, drought conditions, and according to some economists, a problematic president.

• The South African rand managed to reverse its losses against the dollar after being battered by global markets on Tuesday. In early morning trade on Wednesday, the rand was at R16.38 to the dollar. Analysts warn that the currency will remain under pressure – especially leading up to Thursday’s policy meeting.

• In global markets, much is still hanging on fluctuating oil prices and sentiment ahead of the US Federal Reserve Policy due out today. Crude oil is once again heading toward $30 a barrel after an early rally in price followed by profit-taking. This has caused Asian markets to struggle as early gains were lost. China stocks were seen weaker on Tuesday, hitting a 13-month low.

In other news – the Competition Commission has dismissed media reports (PDF) that it is investigating banks for causing the recent rand crash.