Dr. Chris Harmse's weekly review.

1. WEEKLY REVIEW
6 JUNE 2016
W E E K L Y R E V I E W
Table 1: Selected financial market performance: Week ending 3 June 2016
Close Week* Month to date * Year to date * 12 Months*
FTSE/JSE All Share Index* ** 7 371.0 0.3% 0.7% 8.3% 8.1%
ALBI (Bonds) Total return*** 500.1 1.4% 1.2% 8.2% 3.6%
FTSE/JSE SAPY Index (Listed Property)*** 2 108.1 0.6% 1.9% 10.5% 15.6%
STEFI Index (Cash) 341.4 0.14% 0.1% 3.0% 6.8%
Dow Jones TR in ZA ** 566 222.3 -2.5% -2.5% 2.8% 26.0%
S&P 500 TR in ZA ** 54 931.5 -2.2% -2.5% 2.2% 25.6%
JPM GBI Broad Loc TR in ZA** 8 498.9 -1.6% -2.1% 3.4% 33.0%
FTSE 100 TR in ZA ** 110 415.30 -3.7% -3.1% 7.9% -3.1%
Nikkei 225 in ZA** 2 387.3 -1.5% -2.3% -2.8% 17.8%
Deutsche Borse DAX 30 (Germany) TR in ZA** 175 337.9 -2.2% -2.4% -3.0% 10.9%
S&P ASX 200 TR in ZA** 532 795.0 -1.9% -2.6% 1.9% 16.5%
MSCI Emerging Markets TR in ZA** 5 413.5 -1.2% -1.5% 2.3% 4.6%
MSCI Emerging Markets/Real Estate TR in ZA** 3 346.8 -1.0% -1.2% -2.4% 6.5%
MSCI EFM Africa ex South Africa TR in ZA** 10 162.17 -4.0% -2.1% 4.0% 9.2%
MSCI World TR in ZA** 70 419.02 -2.0% -2.4% 0.9% 29.3%
Rand / US Dollar(Negative = Deprecation ZAR) R15.10/$ 3.4% 3.9% 2.6% -19.4%
** Total Returns in Rand
*** Share performances also include dividends and interest, or total returns (TR)
ZA = South Africa Rand
Source: FE Analytics
The discounting of the expected possible
downgrading of South Africa’s sovereign debt by
S&P last Friday as well as important economic data
from China and the US had volatile effects on
financial markets last week.
Despite this “negative” sentiment South Africa’s
share market mostly ended the week in positive
territory. The ALSI on the JSE was up with 155 points
or 0.28%. The ALSI total return index gained 0.3%.
Under the different sectors Industrials increased by
0.5%, the Financial index with 0.4% and Industrials
also by 0.5%. Resources lost 0.7% over the week.
It was clear that both the share and bond markets
since last Wednesday started to discount that S&P
would not change its current grading of South Africa
and rather would wait till its next grading report in
December 2016. This is indeed what had happened.
In reaction to this expectation, as well as the news
that the US job market had only added 38 000 new
jobs during May 2016, (the lowest the last six years)
the Rand exchange rate started to appreciate
against all the major currencies by Friday afternoon.
Against the Dollar the rand gained 53 cents alone
last week and ended the week 3.4% stronger.
Against the British Pound the Rand gained 1.4% and
against the Euro 1.1%.
Prospects of a possible hike in interest rates by the
US Federal Reserve’s Federal Open Market
Commission (FOMC) on June 15 started to dwindle
after the job report released on Friday. Although the
unemployment rate decreased to 4.7% in May 2016
from 5.0% in April 2016, the amount of discouraged
workers, those that cannot find a permanent job had
increased, bringing new concerns over the growth
prospects for the US economy. In this regard the
dollar is likely to move weaker against most
currencies, including the Rand
Given the appreciation of the Rand since last
Wednesday South African bond rates moved
stronger with the All Bond Index (ALBI) gaining 1.4%
(8.2% year to date) during last week. Listed property
shares continue to improve strongly with the SA
Listed property index trading 0.6% higher over the
week (10.5% year to date).

2. WEEKLY REVIEW
6 JUNE 2016
W E E K L Y R E V I E W
In Rand terms almost all important global share
market indices were lower last week. The Dow
Jones industrial index lost -2.5%, whilst the FTSE 100
in the UK was down by – 3.7% the DAX30 in
Germany by - 2.2% and the Nikkei 225 in Japan by -
1.5%. The MSCI world index had decreased by -2.0%.
On the emerging market front, the MSCI emerging
market index in Rand terms also lost – 1.0% with the
MSCI Africa excluding South Africa index down by -
4.0%.
Despite international and domestic political and
economic uncertainties, the Rebalance BCI funds
gained noticeable during the month of May 2016.
The Rebalance Real Income fund increased by 1.21%
and the Rebalance BCI inflation plus 3 fund gained
2.34% for the month. The Rebalance BCI inflation
plus 5 fund was up by 2.85%, whilst the Rebalance
BCI inflation plus 7 fund increased by 6.85% over last
month.
THE COMING WEEK
This week asset prices in South Africa are expected
to continue to strengthen. The Rand is expected to
remain stronger and may gain further against the
major currencies.
Domestically the release of South Africa’s Foreign
Exchange Reserves for May on Tuesday 7 June will
be of importance. The release of South Africa’s
economic growth rate (GDP) for the first quarter of
2016 by STATSSA on Wednesday 8 June however
will be crucial for financial markets this week. The
expectation is that the GDP on an annual basis has
grown by only 0.4%. This is much lower than the
annual growth rate of 1.3% during 2015.
On Thursday 9 June STATSSA will also release
South Africa’s mining production and manufacturing
data for April. On Friday 10 April the Bureau for
Economic Research will publish the RMB/BER
Business. Confidence Index for South Africa during
the second quarter of 2016.
Globally investors’ attention this week will be on
Japan’s leading economic index for April this coming
Tuesday. The Eurozone will also announce its first
quarter 2016 economic growth rate (GDP). The US
will also publish its unit labour costs for the first
quarter 2016.
Japan will release its first quarter GDP growth rate
on Wednesday 8 June. The all-important balance of
trade of China during May also will be released. The
UK will also announce its latest industrial and
manufacturing data. On Thursday 9 June the US will
release its weekly jobless claims data, whilst
Germany and the UK will publish their balance of
trade data for April.
On Friday 10 June Germany will announce its latest
inflation rate, whilst the UK will release its consumer
inflation expectations. Canada will publish its
employment data for May 2016.
THE FUEL PRICE
The average unit over/under recovery for the period
27/05/2016 – 3/06/2016 was:
Petrol 95: 60.0 cents per litre under recovery
Petrol 93: 61.6 cents per litre under recovery
Diesel: 90.4 cents per litre under recovery
(Over recovery means the fuel price should
decrease. Under recovery means the fuel price
should increase). These increases or decreases are
expected to be announced at the end of the month.

3. WEEKLY REVIEW
6 JUNE 2016
W E E K L Y R E V I E W
ABOUT THE AUTHOR
Dr Chris Harmse completed his doctorate degree in Economics at the University of Pretoria.
Prior to entering the financial services industry, he was a lecturer and professor at the
Department of Economics of the University of Pretoria between 1986 and 2005. Dr Harmse was
awarded an extraordinary professorship at the School of Economics of the University of Pretoria
in January 2006. He served on various Investment Committees and is extensively involved in
economic research and asset management.
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