The Absa Inflation Beater Fund has returned 7.8% p.a. for the 3 years to 30 September 2011, comfortably ahead of Headline CPI over this period of 4.5% p.a. The Fund has also returned 8.2% p.a. over the past 5 years.

Over the past year, inflation has been running at 5.3%, and in aggregate the Monetary Policy Committee of the South African Reserve Bank (SARB) has cut interest rates by 650 basis points since their peak. However, inflation (and consequently short-term interest rates) seems now to have bottomed. Both global food and global oil prices have increased sharply from their lows of the past couple of years. Sustained cost-push pressures, relating particularly to the higher oil price and wage-cost inflation, along with the dramatic sell-off in the Rand in September (as well as potential future weakness in the currency) could pose upside risks to inflation.

In September the Rand plummeted against the Dollar from 6.99 at the beginning of the month to 8.09 at the end of the month, and against the Pound from 11.31 to 12.60. The Rand's losses against the Euro were more muted, with the local currency weakening from 9.97 to 10.83. As we have previously pointed out, history has shown that the Rand can both strengthen beyond consensus expecta-tions, and also sell off strongly in a short space of time, particularly when sentiment of foreign investors towards South African financial assets turns negative. We have been cautioning that the significant capital inflows experienced by South Africa over the past 18 months could easily experience sudden reversals.

Over the last couple of years, there has been dramatic stimulus by central banks and governments worldwide, and there is increasing recognition in various circles that fiscal consolidation will be required for years to come. The recent catastrophe in Japan will exacer-bate pressure on that country's fiscus. Furthermore the rolling debt crisis amongst peripheral European nations is increasing nervous-ness amongst various market participants. On 5 August, S&P made the historic decision to downgrade US debt to a rating of AA+. Interestingly, whilst risk appetite amongst global market participants has decreased since then, the US dollar has also been rallying, particularly against the euro. At a "main street" level, the global economic recovery continues to be somewhat anaemic, and the lack of job creation around the world is casting doubt on the extent to which a real business recovery will be able to "carry the baton" once governmental stimulus programmes start to wane.

The outlook for company earnings is quite uncertain; hence whilst there are still pockets of value amongst some local stocks, they are fairly difficult to find. Some stocks are trading at parity (or at a discount) with the market at large, yet have higher earnings and divi-dend yields, strong business franchises and balance sheets, and better visibility of cash flow. We seek to invest in such companies. The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, while targeting a return in excess of inflation.

The Absa Inflation Beater Fund has returned 9.6% p.a. for the 3 years to 30 June 2011, comfortably ahead of Headline CPI over this period of 5.4% p.a. The Fund has also returned 8.4% p.a. over the past 5 years.

Over the past year, inflation has been running at 4.6%, and in aggregate the Monetary Policy Committee of the South African Reserve Bank (SARB) has cut interest rates by 650 basis points since their peak. However, inflation (and consequently short-term interest rates) seem to now have bottomed. Both global food and global oil prices have increased sharply from their lows of the past couple of years. Sustained cost-push pressures, relating particularly to the higher oil price and wage-cost inflation, along with potential future weakness in the Rand, could pose upside risks to inflation.

Currency volatility has traditionally been a significant aspect for South African investors to consider. In June the Rand strengthened against the Dollar from 6.81 at the beginning of the month to 6.76 at the end of the month, from 11.14 to 10.83 against the Pound, and from 9.81 to 9.80 against the Euro. History has shown that the Rand can both strengthen beyond consensus expectations, and also sell off strongly in a short space of time, particularly when sentiment of foreign investors deteriorates towards South African financial assets. The significant capital inflows experienced by South Africa over the past 18 months could easily experience sudden reversals.

Over the last couple of years, there has been dramatic economic stimulus by central banks and governments worldwide, and there is increasing recognition in various circles that fiscal consolidation will be required for years to come. The recent catastrophe in Japan will exacerbate pressure on that country's fiscus. Furthermore the rolling debt crisis amongst peripheral European nations is increas-ing nervousness amongst various market participants. At a "main street" level, the global economic recovery continues to be some-what anaemic, and the lack of job creation around the world is casting doubt on the extent to which a real business recovery will be able to "carry the baton" once governmental stimulus programmes start to wane.

The equity market as a whole is not in cheap territory. Whilst there are still pockets of value amongst some local stocks, they are fairly difficult to find. Nonetheless, some stocks are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow.

The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, while targeting a return in excess of inflation.

The Absa Inflation Beater Fund has returned 9.4% p.a. for the 3 years to 31 March 2011, comfortably ahead of Headline CPI over this period of 6.3% p.a. The Fund has also returned 8% p.a. over the past 5 years.

Whilst high petrol, food and administered prices kept CPI above the SA Reserve Bank's upper limit of 6% for a long time, the generally slowing economy and stronger rand provided significant abatement on the inflation front in 2010. In aggregate the Monetary Policy Committee of the South African Reserve Bank (SARB) has cut interest rates by 650 basis points since their peak. However, although interest rates have come down strongly, sustained cost-push pressures, particularly related to the rising oil price, administered prices, along with potential future weakness in the Rand may well mean that inflation, and consequently short-term interest rates, have now bottomed.

Currency volatility has traditionally been a significant aspect for South African investors to consider; with the Rand strengthening yet again in March, from 6.98 to 6.75 against the Dollar, from 11.34 to 10.84 against the Pound, and from 9.62 to 9.58 against the Euro. As we have pointed out previously, history has shown that the Rand can sell off strongly in a short space of time, and the significant capital inflows experienced by South Africa over the past 18 months could easily experience sudden reversals.

Over the last couple of years, there has been dramatic stimulus by central banks and governments worldwide, and there is increasing recognition in many circles that fiscal consolidation will be needed over the coming years. The recent catastrophe in Japan will exacerbate pressure on that country's fiscus, and raises further concerns about the prospects for a sustained global economic recovery at a "main street" level. Growth in many European countries will be very sluggish for the next number of years, and there is increasing concern that China's growth has also started to slow. A key issue is the extent to which a real business recovery will be able to "carry the baton" once governmental stimulus programmes start to wane.

The equity market as a whole is not in cheap territory. Whilst there are still pockets of value amongst some local stocks, they are fairly difficult to find. Nonetheless, some stocks are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. The Absa Inflation Beater Fund continues to be positioned so as to minimize the risk of capital loss, while targeting a return in excess of inflation.

The Absa Inflation Beater Fund has returned 8.5% p.a. for the 5 years to 31 December 2010, comfortably ahead of Headline CPI over this period of 6.8% p.a. The Fund has also returned 9.4% p.a. over the past 3 years.

Whilst high petrol, food and administered prices kept CPI above the SA Reserve Bank's upper limit of 6% for a long time, the generally slowing economy and substantially stronger Rand has provided significant abatement on the inflation front. Inflation is now well below the 6% mark. Although interest rates have come down strongly, sustained cost-push pressures, and future weakness in the Rand may still be a potential problem area for future inflation, and the SARB will continue to monitor the situation closely. With the Monetary Policy Committee of the South African Reserve Bank (SARB) cutting interest rates by a further 50 basis points in November, in aggregate interest rates have now been cut by 650 basis points since their peak.

Currency volatility has traditionally been a significant aspect for South African investors to consider, and the local currency has been exceptionally strong of late. In December, the Rand strengthened from 7.09 to 6.62 against the Dollar, from 11.04 to 10.30 against the Pound, and from 9.22 to 8.84 against the Euro.

Equities were strong in December, with the All Share Index gaining over 6%. Amongst the major sectors, Telecommunications gained over 11%, and Oil and Gas almost 10%. Health Care was the one major sector that underperformed in the month, gaining only 1%.

Over the last couple of years, there has been dramatic stimulus by central banks and governments worldwide, and there is increasing recognition in many circles that fiscal consolidation will be needed over the coming years. Growth in many European countries will be very sluggish for the next number of years, and there is increasing concern that China's growth has also started to slow. A key issue is the extent to which a real business recovery will be able to "carry the baton" once governmental stimulus programmes start to wane. Whilst profit growth by companies has rebounded off very low base levels, we continue to feel that the prospects for a sustained eco-nomic recovery at a "main street" level remain unclear.

The equity market as a whole is not in cheap territory. Whilst there are still pockets of value amongst some local stocks, they are fairly difficult to find. Nonetheless, some stocks are trading at parity (or at a discount) with the market at large, yet have higher earnings and dividend yields, strong business franchises and balance sheets, and better visibility of cash flow. The Absa Inflation Beater Fund con-tinues to be positioned so as to minimize the risk of capital loss, while targeting a return in excess of inflation.