Anglican Church of Southern African

Monthly Investment Report - Retirement Fund

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July 2017

In a surprise move, the South African Reserve Bank (SARB) decided to cut the repo rate for the first time in five years from 7.0% to 6.75%. As the move came earlier than expected, the announcement weakened the rand and the local unit breached the R13.00 mark to the U.S. dollar. The Monetary Policy Committee (MPC) noted that the inflation outlook had improved, however, it remains concerned that inflation expectations stayed stuck at the upper end of the target range. The SARB argued that, although the move would not inject any significant stimulus to the economy, it may provide some relief to the margin. In addition, local growth prospects had deteriorated with the central bank halving growth projections for 2017 from 1% to 0.5%.

The disinflation trend continued as the headline CPI rate for June came in at 5,1%. This rate was 0,3% lower than the corresponding annual rate of 5,4% in May 2017, making it the lowest inflation rate since November 2015. May retail sales were healthier than expected, posting an increase of 1.7 % year-on-year, following an upwardly revised 2% gain in April. The manufacturing sector continued to be one of the country's most disappointing economic sectors since the global financial crisis. Manufacturing production declined in May 2017 and over the past year manufacturing has achieved an average annual growth rate of -0.3%. The FNB/BER Consumer Confidence Index (CCI) fell to - 9 in the second quarter after increasing from -10 in the fourth quarter of 2016 to -5 in the first quarter of 2017.

The rand depreciated 4.4% against the euro and 0.9% against the U.S. dollar for the month as a less dovish stance by global central banks and increased in downgrade fears put the local unit on the back foot. In addition, talk regarding the nationalisation of the SARB kept the local market and rand nervous. The rand reacted very negatively following the announcement of the proposal and almost touched R13.50 against the U.S. dollar. The FTSE/JSE All Share Index increased by 7% during July, bolstered by rand hedged counters and resources. On a sector basis, the Resources 20 Index returned a whopping 13.7%, while the Financial 15 and Industrial 25 Index gained 5.5% and 6.1% respectively. The local bourse outperformed the All Bond Index, South African Listed Property and cash, which returned 1.5%, 3.7% and 0.6%
respectively during the month of July.

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