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Weekly Commentary - 25 March 2021

Weekly Market Commentary


What made the headlines...


Paris entered another lockdown.  Only essential businesses and schools remain open. State officials are desperate to keep the spread of Covid-19 under control, with the measures expected to cost France around €6bn per month. Without a clear vaccination projection, the lockdown is France's last weapon in the fight against the pandemic.

The International Monetary Fund's board conveyed broad support for drafting a proposal to create $650bn in additional reserve assets to help developing economies cope with the pandemic, with an eye on considering a formal plan by June.  Fund staff will develop new measures to enhance transparency and accountability and explore options for members with strong financial positions to reallocate the reserves, known as special drawing rights (SDRs), to support vulnerable and low-income countries. "If approved, a new allocation of SDRs would add a substantial, direct liquidity boost to countries, without adding to debt burden," Managing Director Kristalina Georgieva said.

Global gross domestic product (GDP) contracted a historic 3.7% last year due to the impact of the coronavirus pandemic, but Moody's Analytics has forecast a rebound of 5.4% in 2021, upgrading its February estimate of 4.9%.  Asia is expected to lead the recovery with a growth of 6.9%, fuelled by China's rapid expansion and India's turnaround.  However, the forecast is predicated on a successful global vaccine roll-out, Moody's Analytics economist Shahana Mukherjee said.

South Africa announced the eight preferred bidders to provide emergency power to boost supply as Eskom continues to implement rolling blackouts that weigh on the economy. The eight bidders (ACWA Power Projects DAO, Oya Energy, Umoyilanga, two projects for Mulilo Total and three for Karpowership SA) will provide almost 2000 megawatts from various technologies to be connected to the grid by August 2022, according to Energy Minister Gwede Mantashe. The projects equate to private sector investment of R45bn ($3bn) under the so-called Risk Mitigation Independent Power Procurement Programme and should reach financial close by the end of July.  About 3 800 jobs will be created during the construction stage and another 13 500 during the 20-year power purchase agreement.

U.S. company ImmunityBio will have its first Covid-19 vaccine made in South Africa by The Biovac Institute, a partly state-owned company, once regulators approve it. Production of the vaccine in South Africa will bolster its role as the only country in Africa to produce the shots.




Global Weekly Commentary

South Africa


The banking company, RMB Holdings, in its 1H21 results, stated that its revenue decreased to R48.00mn from R286.00mn posted in the corresponding period of the previous year. Its diluted loss per share stood at 3.20c compared with 12.50c in the same period of the prior year.

Mall of Africa, South Africa's sixth-largest shopping centre and JSE-listed Attacq's trophy property asset, devalued by over R1bn in 2020.
According to an overview of banks' results by PwC, aggregate headline earnings for all of the banks declined by more than 48% in 2020 compared to the previous financial year.  Return on equity more than halved from 17.8% to 8.3%, and bad debt provisions increased by 2.5 times.  Looking at the actual figures, the headline earnings of the large retail banks that published their results recently declined by more than R50bn from nearly R85bn in 2019 to R43.6bn last year, with PwC noting that the combined profit of the banks is now lower than in 2013.

Data from Statistics South Africa show South Africa's headline consumer price inflation slowed to 2.9% year-on-year in February from 3.2% in January.  On a month-on-month basis, the CPI rose to 0.7% in February from 0.3% in the previous month.  Core inflation, which excludes prices of food, non-alcoholic beverages, fuel, and energy, was at 2.6% year-on-year in February, from 3.3% previously. On a month-on-month basis core inflation rose to 0.6% from 0.1% previously.



The eurozone had posted the seasonally adjusted current account surplus of EUR30.50bn in January, following a current account surplus of EUR36.70bn in the previous month.  The IHS Markit Eurozone Composite PMI rose to 52.5 in March from 48.8 during the last month, well above forecasts of 49.1.

The consumer confidence indicator in the Netherlands edged up to -18 in March from -19 in the previous month, still the strongest reading since March last year, when the first lockdown was announced, but far below its long-term average over the past twenty years (-7).  Household spending in the Netherlands plunged 13.5% year-on-year in January, the most significant drop since last April. The biggest decreases were seen in spending on services (-17.9%) and durable goods (-25.1&%). Consumers spent much less on clothing, home furnishings, and electrical equipment. Meanwhile, consumption of food, beverages and tobacco rose 7.9%.

The IHS Markit Flash Germany Composite PMI increased to 56.8 in March from 51.1 in February and beating market forecasts of 51.6, flash estimates showed. The reading pointed to the strongest growth in private sector activity in nearly three years, amid a record growth in manufacturing (66.6 vs 60.7) and a rebound in services activity (50.8 vs 45.7) as coronavirus lockdown measures were partially eased.

Italy posted a current account surplus of EUR 710mn in January, compared to a EUR 988mn deficit in the previous year's corresponding month. The country's trade surplus widened to EUR 1.6bn in January, up from EUR 0.5bn in the same month last year. Exports slumped 8.5% due to lower sales of consumer goods (-9.7%), capital goods (-9.8%), intermediate goods (-3.4%), and energy products (-33.7%). Among major trade partners, exports were down to the E.U. (-4.7%), in particular France and Spain, and non-EU countries (-12.7%) led by the U.S. and the U.K. Meanwhile, imports tumbled 11.6% due to purchases of consumer goods (-13.9%), capital goods (-7.5%), intermediate goods (-3.9&), and energy products (-33.9%). Imports were down from the E.U. (-5.8%), mainly Germany, France, the Netherlands, and Spain. Imports from non-EU countries plunged 18.3%, led by the U.K., the U.S., and China.

United Kingdom


A year of Covid-19 lockdowns has cost the U.K. economy £251bn – the equivalent of the entire annual output of the south-east of England or nearly twice that of Scotland.  Gross value added (GVA) – which measures the value of the goods and services produced by the economy, minus the costs of inputs and raw materials needed to deliver them – was more than £250bn lower than it would otherwise have been.  This month, the Office for National Statistics said output, as measured by gross domestic product (GDP), was 9% below wh ere it was in February 2020, the last month before the first lockdown.

The U.K.'s unemployment rate edged down to 5% in the three months to January, from 5.1% in the previous period and below market forecasts of 5.2%. Still, the jobless rate remains the highest in 5 years as the country was under a coronavirus lockdown in January.  It would have been even higher if not for the government Job Retention Scheme, supporting about 4 million jobs, one in five employees. The employment rate was unchanged at 75%, and inactivity edged up to 21%, primarily driven by students. There were an estimated 601 000 vacancies in the three months to February. Separate figures based on tax data show the number of employees on payrolls rose for a third consecutive month in February. The increase of 68 000 still left the total down by 693 000 from February last year. Growth in average earnings, including bonuses accelerated to 4.8%, the fastest since 2008.

Wages increased in both the private (4.8%) and public sectors (4.7%); services (5.4%) and finance and business services (7.6%); manufacturing (2%); wholesaling, retailing, hotels & restaurants (3.2%) and construction (2.5%). Excluding bonuses, nominal wages rose 4.2% to GBP 532, the steepest gain since the three months to May of 2008, missing market estimates of a 4.4% increase.

United States


Within just five weeks last year, the longest bull market on record erased three years' worth of stock gains, crashing more than 30% from an all-time high in February to a pandemic low on 23 March. One year and trillions of dollars in government spending later, stocks have staged a historic rally, taking investors on a wild ride.

Some highlights: Electric carmaker Tesla is now one of the most valuable companies globally. The cryptocurrency market has swelled to more than $1 trillion, and so-called meme stocks dominate Wall Street commentary with volatile swings that force exchanges to halt trading. It's still unclear how long the new bull market can last, but one year after one of the worst stock market crashes in history, here's a look at its monumental recovery.

The S&P 500 is up 76%.  It took just five months for the S&P 500 to recover its steep Covid-induced losses, the fastest recovery ever for a correction of more than 30%. To compare, it took the index a staggering 20 months to recover after the index crashed by 34% in 1987.  


The Dow, which counts 30 market leaders in its ranks, has also soared 76% over the past year, though its pandemic low was on 16 March, one week before the S&P's trough.

A new stay-at-home normal that catapulted stocks like Zoom and Slack helped the tech-heavy Nasdaq climb 95% during the pandemic.

Perhaps most emblematic of the market's bullish mania is the staggering gains in the meme stocks popularised by an army of Reddit traders in late January. Heading up gains is GameStop (up 5 005%), the past year's best-performing stock in the Russell 2000.

Tesla made its S&P 500 debut in December and now carries about 1.5% of the index's weight.  Although it was last year's best-performing S&P 500 stock, it is down for the year and has plunged nearly 25% from a late-January high;  a sign the recently booming market for tech stocks could be over once post-pandemic spending drives growth into other industries. 



The price of the world's largest cryptocurrency, Bitcoin, has skyrocketed over the past year (up 730%) amid booming institutional adoption and heightened inflationary concerns.  These concerns are fueled by massive government spending to combat the pandemic. 



Singapore's annual inflation rate jumped to 0.7% in February from 0.2% a month earlier and above the market consensus of 0.6%. This was the highest reading since January 2020, amid rising consumption during the Lunar New Year festival. Main upward pressure came from food (1.6% vs 1.5% in January), transport (3.1% vs 0.7%) and recreation & culture (0.1% vs -1.2%). By contrast, there were falls in cost of clothing & footwear (-6.3% vs -4.6%), health (-0.2% vs -0.1%), and miscellaneous goods & services (-1.4% vs -1.5%). Core consumer prices, which exclude accommodation and private road transport costs, increased by 0.2% from a year earlier; the first yearly increase in 13 months, after a 0.2% drop in January and beating market forecasts of a 0.1% rise. On a monthly basis, consumer prices rose by 0.6% in February, the most in six months, after being unchanged in January.

The annual inflation rate in Hong Kong fell sharply to 0.3% in February from a 9-month high of 1.9% in January. Still, the year-on-year rise in the CPI is due to a low base of comparison arising from the Government's payment of public housing rentals and waiver of two-thirds of rent. Netting out the effects of all Government's one-off relief measures, the year-on-year change was -0.1%, compared to -0.5% in January. Price increases in February were seen for electricity, gas, and water (19.3%); food (excluding meals bought away from home) (1.5%); miscellaneous services (1.2%); and meals bought away from home (0.2%). On the other hand, decreases were recorded for clothing and footwear (-3.9%), transport (-2.9%), durable goods (-1.7%), alcoholic drinks and tobacco (-0.9%), housing (-0.2%), and miscellaneous goods (-0.1%).

According to a new report from BofA Securities, India is set to overtake Japan as the world's third-largest economy behind the U.S. and China by 2031.  The investment banking division of Bank of America previously predicted that overtaking to happen in 2028 but said the economic shock from Covid-19 would push back the timeline by three years.  The researchers noted India should reach Japan's nominal GDP in dollar terms in 2031 if it grows at 9% annually — assuming real GDP growth of around 6%, an average inflation rate of 5%, and 2% depreciation. If growth touches 10%, then India can potentially top Japan by 2030.

Hong Kong ranked fourth in the 29th edition of the Global Financial Centres Index (GFCI) report, which is published by the City of London's think tank Z/Yen Group in partnership with the Shenzhen-based research firm China Development Institute.  Hong Kong improved its standing among global financial centres in a newly released study, thanks to the popularity of its stock market and many cross-border trading schemes with mainland China.  New York maintained its top spot, followed by London and Shanghai.

China's central bank kept its benchmark lending rate unchanged for the 11th straight month; a sign policymakers are proceeding cautiously to maintain sufficient support for the economy while gradually reducing stimulus to cut debt and defuse financial risks.  The decision by the People's Bank of China (PBOC), comes amid rising concern in domestic policymaking circles about a wave of excess liquidity from the Biden administration's US$1.9 trillion coronavirus rescue package and promises by the Federal Reserve to keep interest rates near zero and continue buying government securities to pump cash into the market.  The aggressive U.S. stimulus measures have already forced some emerging market central banks – including Brazil, Russia, and Turkey – to raise interest rates due to rising inflation pressures.  The PBOC has kept the one-year loan prime rate (LPR) at 3.85%, while the five-year LPR remains at 4.65%.


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