Wealth Advisory Newsletter

Navigating the now

In his review of the markets for the first quarter, Reza Hendrickse, Portfolio Manager at PPS Investments, shares insights on the bullish undertone in markets, global growth expectations and how PPS portfolios are positioned to navigate these conditions, while looking ahead to what the rest of 2021 holds. Read more.

Moody’s holds off on SA credit rating review

A scheduled review of SA’s sovereign credit rating by Moody’s Investors Service became something of a damp squib after the ratings agency said that it opted not to update its Ba2 rating on the country’s debt, leaving it firmly in junk territory. “No rating action was taken, as per the announcement,” Peter Griffiths, a media relations executive at Moody’s, told Business Day.

SA received a double rating blow in November last year when both Moody’s and Fitch cut the country’s sovereign debt rating deeper into junk territory. That happened just as the scale of the economic devastation caused by the Covid-19 pandemic was becoming evident, an impact that ultimately saw GDP contract 7% in 2020, the biggest slump in 100 years. At the time both ratings agencies maintained their negative outlook on SA’s debt with Moody’s lowering its rating to Ba2, two notches below investment grade.

Fitch cut SA’s credit rating to BB-, three notches into junk territory. S&P, which has not changed its assessment of SA’s debt since April 2020, assigns a BB- rating on the country’s credit risk, which is three levels below investment grade. It has a stable outlook on SA’s debt.

Moody’s was the last ratings agency to strip SA of its investment grade rating when it cut its credit assessment on the country to junk in March last year as the pandemic began to bite. That resulted in SA dropping out of the World Government Bond Index, forcing investors whose mandates preclude them from investing in non-investment grade debt to dump SA bonds. Moody’s next ratings review is scheduled for November 19.

SA economy is seeing massive bounceback – BankservAfrica

The South African economy is seeing a massive bounceback according to data from BankservAfrica. According to the BankservAfrica Economic Transaction Index (BETI) reported by Moneyweb, the country recorded its “highest and fastest growth level ever” in April when it grew 25.9% in real terms on a year-on-year basis.

Though impressive, this rise does not tell the whole story, as the BETI had fallen 15.3% in the corresponding period in 2020. Back then, SA was going through the hard lockdown, which resulted in large parts of the economy shutting down for weeks. BETI measures monthly transactions paid into the South African National Payments System, and in April there were 109 million transactions valued at R1.03 trillion.

By comparison, in April 2020 there were 90 million transactions valued at R679 billion. The steepness of the drop-off can be seen in the number of transactions in March 2020 being 103 million valued at R819 billion. BankservAfrica notes that the record rise is off a low base.

Absa PMI falls for first time in four months

The Absa Purchasing Managers Index (PMI), a gauge of the health of the manufacturing sector, fell for the first time in four months in April, though the indicator remained in positive territory.

The seasonally adjusted Absa PMI, which is published in conjunction with Stellenbosch University’s Bureau for Economic Research (BER), fell to 56.2 index points in April following three consecutive months of improvement, reported by Business Day.

Absa’s April PMI was down from the March reading of 57.4, which was a five-month high, though it remained above the neutral reading of 50 index points, indicating an expansion in manufacturing activity.

The April reading also showed that all five subcomponents of the Absa PMI were in positive territory for the first time since early 2012. Even the employment index, the subcomponent that most often trails below the 50-point mark, managed to increase to well above the neutral level in April.

The business activity index declined markedly in April after solid improvements in the preceding two months, but managed to stay in positive territory. The index fell back to 50.8 points in April, from 56.1 the previous month, indicating that while business activity increased in April, it was occurring at a much slower pace than in the previous two months.