Economic and strategy update Radical economic transformation on the cards

Transcription

1 Economic and strategy update Radical economic transformation on the cards E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 24 th February 2017

2 Table of contents Key themes of the past year Global Trends Securities markets Table of Contents Table of Contents

3 Economic overview Will we be able to avert the dreaded downgrade? E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 26 February 2016

4 Economic overview Higher rates a risky move E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 18 March 2016

5 Economic and strategy update Dodging political curve balls E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 8 Apr 2016

6 Economic and strategy update it is that month of the year - in case you ve missed it E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 19 May 2016

7 Economic and strategy update Politics to dominate over the short term E C O N O M I C R E S E A R C H Hugo Pienaar Tel: +27 (0) hugop@sun.ac.za 23 June 2016

8 Economic and strategy update The search for yield driving the risk-on trade; fundamental support doubtful, though E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 22 July 2016

9 Economic and strategy update Paying the price for political games E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 23 September 2016

10 Monthly Economic & Strategy House-view It s the darkest just before the break of dawn... E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 27 th October 2016

11 Economic & Strategy update Political roller-coaster E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 1 st December 2016

12 Economic and strategy update Politics and policy may overshadow data E C O N O M I C R E S E A R C H Johan Rossouw Tel: +27 (0) johan@vunanisecurities.co.za 22 nd February 2017

13 Equities stabilise after Trump rally, confidence indicators positive Index, Jan '16 = 100 Index US election Jan-2016 Apr-2016 Jul-2016 Oct-2016 Jan-2017 S&P 500 Russell Jan-00 May-03 Sep-06 Jan-10 May-13 Dec-16 Univ Mich Consumer sentiment All-time record number of consumers (18%) spontaneously mentioned expected favourable impact of Trump's policies on economy - twice as high as prior peak (9%) recorded in 1981 when Reagan took office. US NFIB small business index rose record 7.4 points in Dec 16 to highest level since Dec Source: Reuters / US Fed Global Trends

14 Global manuf output on a steep incline, SA lagging Manu PMI, index points Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Global manufacturing PMI SA US ISM 014 Source: Markit / BER Global Trends

15 World economic growth gradually improving 015 Source: National Treasury Global Trends

16 SA consumers under strain in 2016 y-o-y % change Q1 2008Q4 2010Q3 2012Q2 2014Q1 2015Q4 Net % Consumer spending: excl services Consumer spending: total FNB/BER consumer confidence (rhs) 016 Source: Vunani Securities

17 Low confidence levels holding back SA growth y-o-y % change index Real private fixed investment RMB/BER BCI (rhs) 017 Source: Stats SA / BER

18 We indicated a year ago that at R16.14/$: Rand still much weaker than estimated fair value 018 Source : INET BFA & Vunani calculations and forecasts

19 Rand no longer Emerging Market - ugly duckling Index, 9 Dec 15 = US election Assuming USD around $1.05, Rand set to remain in R13.00 R14/$ range Dec-2015 Feb-2016 Apr-2016 Jun-2016 Aug-2016 Oct-2016 Dec-2016 SA rand Turkey lira Aussie dollar Mexico peso 019 Source: Reuters

20 The fair value gap closed, but the Rand still well oversold 020 Source : INET BFA & Vunani calculations and forecasts

21 Maize decline still needs to filter through to consumer inflation y-o-y % change 30 y-o-y % change Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 PPI agriculture PPI manufacturing: food products CPI food White maize future (rhs) 021 Source: Stats SA / Reuters

22 Consumer inflation: risk to the down-side Headline CPI, y-o-y % y-o-y % ch 2017Q Q Current weights New weights SARB (Jan MPC) N. Treasury Risks: Armyworm Sugar tax? Currency 4.5 Jan-16 Jun-16 Nov-16 Apr-17 Sep-17 Feb-18 Jul-18 Dec-18 Stable repo rate Current weights New weights / rebasing 022 Source: Stats SA / Vunani Securities /National Treasury

23 SA macro outlook: Tax base projection too rosy?? 023 Source: National Treasury

24 SA Main Budget 024 Source: National Treasury

25 Revenue estimates 025 Source: National Treasury

26 Tax proposals to address shortfall 026 Source: National Treasury

27 SA government expenditure 027 Source: National Treasury

28 SA fiscal redistribution 028 Source: National Treasury

29 SA expenditure ceiling under control 029 Source: National Treasury

30 Tax buoyancy suggests taxpayers can t take more 030 Source: National Treasury

31 Growth in spending by function 031 Source: National Treasury

32 Allocations to provinces and local authorities 032 Source: National Treasury

33 Domestic equity market return scenarios (ex dividend) Rolling twelve months equity performance Base case Spot Rolling twelve months ending: Rolling 2 yr 31-Jan Jan Jan-19 average/year FTSE/JSE Alsi Index Exit PER (X) EPS EPS growth (%) Growth in FTSE/JSE Alsi index (%) Bull case Rolling twelve months ending: 31-Jan Jan Jan-19 FTSE/JSE Alsi Index Exit PER (X) EPS EPS growth (%) Growth in FTSE/JSE Alsi index (%) Bear case Rolling twelve months ending: 31-Jan Jan Jan-19 FTSE/JSE Alsi Index Exit PER (X) EPS EPS growth (%) Growth in FTSE/JSE Alsi index (%) Source: INET BFA & Vunani calculations and forecasts Securities markets

34 Forecast tracker 034 Source: INET BFA & Vunani calculations and forecasts Securities markets

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