Anglican Church of Southern African

Monthly Investment Report - Pension Fund

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March 2018

As widely anticipated, the South African Reserve Bank (SARB) decreased the repo
rate to 6.5%. SARB Governor, Lesetja Kganyago, explained that inflation forecasts had
remained largely unchanged, with the stronger rand likely to mitigate the temporary
inflationary effect of the VAT increase. The SARB's internal forecast model pointed
towards a more moderate path of interest rate hikes, with one hike of 25 basis points
by the end of 2019. This is compared to two to three hikes at the time of the January
meeting this year. The SARB communicated that the decision to relax policy by 25
basis points does not signal the start of a cutting cycle, with the Monetary Policy
Committee (MPC) reiterating that they would prefer to see inflation expectations
anchored closer to the 4.5% median of the target band.

Moody' credit rating agency left the country's long-term credit rating unchanged at Baa3
(as expected), although the agency's decision to also change the country's outlook
from negative to stable was a welcomed surprise. Moody's communicated a more
positive stance toward the country's institutional strength given the adoption of a more
transparent and predictable policy framework. Nonetheless, the credit rating agency
cautioned that the ability of the new administration to push through with the promised
and required reforms remains to be tested. The credit rating reprive, coupled with a
weaker U.S. dollar resulted in the local unit dipping below R11.70 against the
greenback for the first time in the month. Local bonds mirrored the stronger rand as the
yield on the S.A. 10-year dipped below 8%. Earlier in the month, fourth-quarter growth figures showed that the economy's GDP growth improved by 3.1% (quarter-onquarter).

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