The Nedgroup Investments Cash Plus Fund will change it's name to Nedgroup Investments Core Income Fund, effective from 19 December 2011

The view from the bottom -we have seemingly reached the bottom of the interest rate cycle with the MPC holding the repo steady at the last meeting. Further rate cuts are unlikely, with most emerging markets tightening monetary policies in an attempt to rein in inflation, while a pre-emptive rate hike may hinder economic growth. Domestic inflation risk is on the upside with concerns surrounding wage increases, food and energy prices and rand volatility. The recovery appears well underway, but risks remain in the austerity policies and balance sheets of developed nations.

CPI inflation y-o-y remained steady, the February figure came in at 3.7%, in line with estimates. Inflation forecasts for the coming year are treading upwards, but still contained within the inflation band -mainly due to expectations of a firm rand and muted increases in consumer demand. PPI surprised on the upside, increasing to 6.7% y-o-y due to higher global agricultural and commodity prices, and is likely to continue this trend for the year.
Growth in the money supply came in at 7.55% y-o-y in February, against a consensus view of 8.5%, a slowdown from the January figure. PSCE increased in February to 5.43% and growth is expected to continue due to low interest rates and improved purchasing power of household incomes. Corporate credit demand increased 1.3% m-o-m, reflecting an improved outlook on future economic growth and the need for capacity building. However, credit growth continues to be supported largely by household demand and this should continue through the year.

The portfolio continues to outperform the benchmark STeFI Composite and is exposed largely to banks (89% in March), while 11% of the portfolio is in Government securities or short-term corporate debt.

The scope for a rate hike by the end of the year seems more likely given the current economic data and the tone of the Governor's address post the last MPC meeting. Inflation expectations are within the target range, but upside risk remains in the volatility of the rand and energy prices. To this extent the portfolio is well invested for a change in the rate cycle.