Market Commentary | The week that was
Coronation to report losses: The asset management company is expected to report losses in a costly tax case. Coronation will, therefore, not pay dividends as the financial impact of the Supreme Court's Appeal ruling in favour of SARS. The company was ordered by the court to pay additional taxes linked to its Irish operations. This has a negative impact on the company's earnings and cash flows. The company is required to raise a provision of between R800 - R900 million. On Friday's trading update, Coronation experienced a fund management loss per share of between 21.5 and 43 cents in the six months to 31 March 2022. The group's share price closed 1.8% lower on Friday at R28.96 a share. If Coronation's leave to appeal is approved by the SCA, it is probable that the case will be heard during the 2024 financial year.
Increase in water prices: South Africa is a water-scarce nation, and with the growing mismanagement, load-shedding, corruption, and the progressive impact of climate change, the provision of water is currently on an unsustainable path. South Africa's demand for water is projected to suppress the supply by 17% in 2030. The government needs to increase investments in water infrastructure, and the price of water will have to be raised. Water is a basic human right, and any measures to price it more appropriately would have to take this into account.
Growth for Industrial Sector: The Industrial sector is expected to make a positive contribution to Q1 real GDP as the overall trade sector is set to perform better in 2023 Q1 compared to 2022 Q4. Considering all the latest economic data from the country's trade and industrial sectors, the Bureau for Economic Research (BER) expects the South African economy to avoid a technical recession in 2023 Q1
Markets: The rand fell on Monday, 24 April, as markets waited for US economic data later this week that could impact the Fed's rate hike cycle. The lack of risk appetite for the rand comes from the Fed likely shaping the South African Reserve Bank's interest rate response. On Tuesday morning, the Rand was trading at R18.19/$, R20.10/€, and R22.69/£, brent crude is trading at $82.49 a barrel.
Looking ahead:
In South Africa, the trade balance data will be released on Friday. Earning announcements from The Purple Group Ltd and PSG Group Ltd is expected. US and European GDP (Gross Domestic Product) and US PCE (Personal Consumption Expenditure) inflation data are among the main events of the week.
