Headlines

  1. Morningstar expects SA shares to excel.
  2. SA to get $750 million World Bank loan to boost economic recovery.
  3. China cuts key rates, steps up monetary stimulus to boost economy.
  4. Intel plans $20 billion chip manufacturing site in Ohio.
  5. Currencies: USD/ZAR –R15.21, EUR/ZAR – R17.23, GBP/ZAR – R20.68

South Africa

  1. Fund manager opts for higher exposure to local companies with good prospects. Morningstar Investment Management SA is convinced that South African companies will continue to perform well in 2022, so much so that the firm has weighted its portfolios towards local companies. MD Victoria Reuvers says 2021 was by no means a dull year and, while it looked like markets performed well, there were some “land mines” that couldn’t have been avoided. She mentions the bottom in global bond markets, the debacle surrounding China’s Evergrande real estate group, the unexpected slump in Chinese technology stocks, and the effect of it all on emerging markets. “If we look at the various asset classes across the calendar year, the first point that stands out is the broad positive returns across all nine the asset classes in 2021,” says Reuvers. “The second is the rotation in the ranking, highlighting the importance of diversification.” However, it is her views on the outlook for local companies that stands out amid the continuing trend among SA investors to move their money – and often their families – abroad. “After a seven-year drought … the past 18 months have seen a strong rebound in SA equities with broad-based returns across sectors. While 2020 saw resource shares [mainly platinum and diversified miners] performing well, 2021 saw a rotation into more unloved areas of the market. “Looking back at 2021, the strongest performing areas were what we would term SA Inc shares, namely banks, retailers and select industrial shares.” (Moneyweb, 2022)

 

  1. The World Bank announced on Friday morning that it had approved South Africa’s request for $750 million (about R11.4 billion) loan. “This loan will support the government of South Africa’s efforts to accelerate its Covid-19 response aimed at protecting the poor and vulnerable from the adverse socio-economic impacts of the pandemic and supporting a resilient and sustainable economic recovery,” the World Bank and SA’s National Treasury said in a joint statement. This completes the country’s aim to secure R95 billion from multilateral institutions. In July 2020 the International Monetary Fund granted SA a $4.3 billion (around R70 billion at the time) loan to support job creation and protection for businesses impacted by the Covid-19 pandemic. In April 2021, it was announced that SA would get a $1 billion (R14.5 billion at the time) loan from the New Development Bank (NDB). The NDB is a development finance institution established by Brazil, Russia, India, China and SA as part of the BRICS grouping. The World Bank and Treasury said on Friday that the “low interest” $750 million development policy loan (DPL) is meant to support the country’s implementation of the country’s Economic Reconstruction and Recovery Plan. According to the statement it will enhance financial sector stability – specifically the establishment of a deposit insurance scheme, and will support SA’s “commitment to climate change”.  (News24, 2022).

 

 

Global

  1. SHANGHAI (Reuters) -China lowered mortgage lending benchmark rates on Thursday as monetary authorities step up efforts to prop up the slowing economy, after data earlier in the week pointed to a darkening outlook for the country’s troubled property sector. The cut to the one-year and five-year loan prime rates (LPR) followed surprise cuts by China’s central bank on Monday to its short- and medium-term lending rates, and came days after the central bank’s vice governor flagged more moves ahead. With the property sector’s downturn seen persisting into 2022 and the fast-spreading Omicron variant dampening consumer activity, many analysts say those easing measures will be necessary, even as other major economies, including the United States, appear set to tighten monetary policy this year. December economic data showed further weakening in consumption and the property sector, both major growth drivers. At a monthly fixing on Thursday, China lowered its one-year loan prime rate (LPR) by 10 basis points to 3.70% from 3.80%. The five-year LPR was reduced by 5 basis points to 4.60% from 4.65%, its first cut since April 2020. China’s central bank “should hurry up, make our operations forward-looking, move ahead of the market curve, and respond to the general concerns of the market in a timely manner,” People’s Bank of China Vice Governor Liu Guoqiang said on Tuesday, heightening market expectations for more stimulus. All 43 participants in a snap Reuters poll had predicted a cut to the one-year LPR for a second straight month. Among them, 40 respondents also forecast a reduction in the five-year rate. The cut to the 5-year rate suggested that “the Chinese authorities are keen to lower the cost of credit lending, so total credit growth is expected to rebound after the Spring Festival to ease the pressure on macro economy,” said Marco Sun, chief financial analyst at MUFG. (Investing.com, 2021).

 

  1. WASHINGTON/SAN FRANCISCO (Reuters) – Intel Corp (NASDAQ:INTC) on Friday is set to announce it will invest $20 billion in a massive new manufacturing site near Columbus, Ohio to develop and manufacture advanced semiconductor chips, sources briefed on the matter told Reuters. The planned investment includes 3,000 permanent jobs on the 1,000-acre site in New Albany, Ohio. Time magazine, which first reported the news, said Intel will build at least two semiconductor fabrication plants. President Joe Biden is making remarks Friday on the U.S. government’s efforts “to increase the supply of semiconductors, make more in America, and rebuild our supply chains here at home,” the White House said earlier. Intel Chief Executive Pat Gelsinger is set to appear with Biden on Friday at the White House, sources told Reuters. The White House did not respond to a request for comment. The initial $20 billion is the first step of what could be an eight-factory complex costing tens of billions of dollars. Intel declined to comment on its plans but said in a statement that Gelsinger would disclose details Friday of “Intel’s latest plans for investment in manufacturing leadership” as it works “to meet the surging demand for advanced semiconductors.”. Chipmakers are scrambling to boost output after manufacturers around the world, from autos to consumer electronics, faced shortages of chips. Intel also is trying to win back its position as maker of the smallest and fastest chips from current leader TSMC, which is based in Taiwan. Gelsinger last fall also said he planned to announce another U.S. campus site before the end of the year that would eventually hold eight chip factories. He told the Washington Post the complex could cost $100 billion over a decade and eventually employ 10,000. (Investing.com, 2021).

Chart of the week

Asset Class Performance (VisualCapitalist.com)