We give our initial reaction to the budget – there are some positives for local markets
• The Treasury targets faster fiscal consolidation for the current year and the medium term
• Delivery risk will be linked both to the external environment a...
• The South African Reserve Bank (SARB) has raised its repo rate by 50bps to 5.5% for the first time since the 2008-09 global economic crisis. Although there was a modest downward adjustment of growth forecasts for 2014 and 2015, revised SAR...
• Growth should remain strong in 2013, boosted by high government spending and low interest rates
• An expansionary fiscal policy will continue to contribute to a widening fiscal deficit, estimated at 6.4% in 2013
• Deterioration in South African ...
• Local fundamentals are likely to prevail now that some element of an early tapering of QE is priced in
• We remain Overweight FX and duration on Nigeria on supportive fundamentals and valuations
• We also maintain an Overweight duration stance o...
• Weaker momentum in the domestic economy and a still-sluggish external environment suggest softer growth. We cut our 2013 GDP growth forecast to 2.2%, from 2.7% previously
• Given a substantial negative output gap, South African interest rates are...
• Growth momentum in Sub-Saharan Africa remains largely positive, despite uncertainty related to Fed tapering expectations and slowing trend growth in China
• African economies will not be impacted uniformly by a reduction in QE. More liquid marke...
• Prospects in the Sub-Saharan African region remain largely positive, despite uncertainty related to market expectations of Fed tapering, and a slowdown in China’s growth trend to more sustainable levels.
• South Africa is more susceptible to glob...
• We expect the Reserve Bank to keep rates on hold today; we see a 30-40% chance of a cut
• A 50bps cut would not change our market view: Overweight ZAR rates, Underweight ZAR FX
• We stay Underweight on FX as risks from the mining sector and the...
• Barring any new supply-side shocks, 2013 growth should improve on the 2.5% recorded in 2012
• Higher public-sector investment and accommodative monetary policy should support growth
• A more competitive ZAR is key to South Africa’s recovery pro...
South Africa surprises negatively with a deficit estimate of 5.2% of GDP in FY13
• While weak revenue is a key driver, expenditure restraint is nonetheless evident
• Further rating action is possible if growth does not improve
• We maintain a nea...
• South Africa is set to announce lower growth forecasts in Thursday’s MTBPS
• However, expectations of near-term deficit deterioration appear overdone
• The Treasury is under pressure to respond to rating-agency concerns
SARB surprises markets with a 50bps rate cut, taking the repo rate to 5%
• While downside risks predominate near-term, future imbalances are still a concern
• Further rate easing is unlikely, unless global conditions deteriorate meaningfully...
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The world economy is in transition. Global growth rates are picking up, but transition means elevated risks and volatility.
In terms of global implications, all eyes will be on the US and China, with the US normalising monetary policy and China rebalancing its economy.
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