Flash Briefing: SA rates likely to drop – Moody’s; Trade wars power up gold stocks; African swine fever to hit SA consumers

By Jackie Cameron

In today’s Biznews Flash Briefing:

  • Ratings agency Moody’s Investors Service has said it expects South Africa’s interest rates to fall. Moody’s says it sees the central bank cutting its interest rate to support the economy. The Monetary Policy Committee maintained the repurchase rate at 6.75% in May, but at that time two of the five MPC members favoured a 25 basis-point cut, reports Bloomberg. The bank slashed the nation’s economic-growth forecast to 1% from 1.3%, it adds. Moody’s expects the South African economy to expand 1% this year and 1.5% in 2020, the ratings company said in its emailed global macro outlook document Thursday.
  • It’s not just South Africa that is struggling to turbo-charge its economy. Amid concerns that a global recession looms, the European Central Bank has kept low-rates unchanged, reports Bloomberg.
  • Part of the concern about slowing global growth stems from US trade offensives against China, Europe and Mexico, which have created volatility on global markets. But behind every cloud there is a silver lining, with this volatility creating advantages for South African gold-mining stocks. Analysts have raised earnings forecasts for South African gold miners by 35%, says Bloomberg. The FTSE/ JSE Gold Mining Index has been rising steadily in recent weeks as investors’ expectations for a quick deal between the US and China have evaporated. Spot gold was up to around $1,337 an ounce late on Thursday.
  • Also set to benefit from a Trump-sparked trade war with China could be Chinese rare earths. A group of 17 elements that appear in low concentrations in the ground, rare earths are used in a wide-range of products stretching from lasers and military equipment to magnets found in consumer electronics, as Reuters reports. The prediction is that Chinese rare earth prices are set to climb further beyond multi-year highs hit following as Beijing could weaponise its supply-dominance of the minerals in its trade war with the US. China supplied 80% of the rare earths imported by the US from 2014 to 2017, with Chinese state newspapers last month reporting Beijing could use that as leverage in the ongoing trade dispute between the two, says Reuters.
  • Asia is losing the battle to stop the biggest animal disease outbreak the planet has ever faced. African swine fever, also known as pig ebola because pigs internally haemorrhage until they die, has led to the culling of more than 1m pigs in China and Vietnam. There have been cases in Thailand, Hong Kong and North Korea. Experts expect that about 200m pigs will be slaughtered. Although there have been only sporadic incidents of African swine fever in South Africa, the epidemic has led to a rise in global meat prices. Global pork prices, says the UK-headquartered Guardian, have risen about 40%. Local agricultural analyst Wandile Sihlobo warns that South African consumers are likely to feel the effect of the African swine fever outbreak.
  • On the JSE, big movers on Thursday included British American Tobacco, with its share price up about 3.5%, and paper and packaging company Sappi, which shed nearly 4%.
  • Also on Thursday, the rand was trading at around just under R15 to the US dollar and about R19 to the British pound, while R17 could get you one Euro.