JOHANNESBURG – More and more evidence suggests that the South African economy and financial markets will have a normal year in terms of stability and recovering.
After the economy went into a recession last year, given the drought in the agriculture sector, as well as lower international prices for gold and platinum, sluggish exports and manufacturing production, pressure had mounted on South African Financial markets.
Given the strong increase in the international oil price during 2018, as well as a depreciation of 16 percent in the rand exchange rate, higher fuel and food prices have driven up the inflation rate in South Africa. This had paved the way for an increase in the interest rate by the Monetary Policy Committee in November.
The ongoing trade war between the US and China, four interest rate increases by the US Federal Reserve and uncertainty over global economic growth also contributed to volatile and negative share prices domestically. Since the beginning of January 2019 it seems that the global and domestic financial storm returned to some calmness. The more dovish approach towards further US interest rate hikes and a growing optimism that a trade agreement between the US and China is on the brink, had set the tone for more optimism towards stable and “normal” share, capital and money markets, especially for emerging economies.
Despite the ongoing Brexit saga, hope still prevails that a settlement between the UK and the EU will be reached. This more bullish sentiment had a positive impact on the South African share, bond and listed property markets with the rand exchange rate experiencing its most stable two-week periods in more than a year.