Metropolitan Property Abs Income comment - Sep 06 - Fund Manager Comment21 Nov 2006
SA's current account deficit could widen further in the second half of 2006, requiring strong capital inflows to fund the deficit, putting pressure on the rand to weaken. Taking the widening current account into consideration and the risk of a weakening currency we believe that the MPC will hike rates by 50 basis points in October, with another potential 50 basis points over the next 6 months.
We believe that a global slowdown would benefit bonds although the headwind of inflation has not run its full course. On the money market we remain relatively short duration as we expect rates to move higher over the next few months.
During the 3rd quarter the SA listed property sector recovered from a weak 2nd quarter and was up 9.2%. This was driven mainly by inflows into unit trusts. There were also good results from companies reporting, with distribution in income up by an average of 10%. The high weighting (45%) in listed property shares was maintained during the period. Despite the current volatility of the listed property sector the sector still offers value.
Metropolitan Property Abs Income comment - Jun 06 - Fund Manager Comment29 Aug 2006
The global economy remains quite strong at midyear, with growth maintaining a rapid pace in Asia, accelerating strongly in the Euro area, and close to trend in the United States. Solid growth prospects and rising inflation pressures are encouraging central banks to raise rates to neutral, with the Fed poised to move into restrictive territory.
South African asset markets remained turbulent over the past month, driven by concerns over the widening current account deficit, and uncertainty about interest rate outlook. The rand plunged against the major currencies during the month dragged down by continued emerging market concerns and the news that the current account deficit widened to a 24-year high of 6.4% of GDP. Recent pressure on the currency has significantly increased the risk of further rate hikes in the second half of the year. The local bond market weakened in line with the rand. SA bond yields have risen sharply since February 2006.
The SA Listed Property sector was down 19% for the second quarter, on the back of 0.5% rise in interest rates and the market expectations of further rate increases. The return for bonds was - 3.6% and cash 1.8%. Over the quarter the fund had no exposure to bonds. The asset allocation for the fund at end of June 2006 was equity: 44% and cash: 56%. At current levels the listed property sector offers value.