Fund review

For the quarter under review, the fund remained overweight floating rate notes, with a weighted average duration of 40 days at the end of September. The fund size was R24.8 billion at the end of the quarter.

Market overview

For the quarter under review, the South African Reserve Bank’s (SARB) MPC committee left the repo rate unchanged at 6.50%. The votes to keep the repo rate unchanged were unanimous. Inflation has remained around the mid-point of the inflation target, printing 4.3% year-on-year in August. Inflation expectations have moderated. However, the downside risks to growth remain and, in most sectors, are a serious concern. Growth in world trade volumes continues to decline due to trade wars between the US and China. There are risks of oil price shocks which will filter through to the fuel price in SA. The reasons detailed for keeping the repo rate unchanged were rand depreciation of 4.6% against the dollar and a persistently uncertain environment. The governor of the SARB highlighted that the current challenges facing the economy are mostly structural and cannot be resolved by monetary policy alone. Structural reforms that raise growth and lower the cost structure of the economy remain urgent.

Looking ahead

The SARB adopted a wait-and-see stance as there are still concerns about Eskom’s restructuring, the Medium-Term Budget Statement (MTBS) which has been delayed by a week and Moody’s impending credit rating decision on SA scheduled for 1 November. Depending on the Eskom restructuring model being announced, a constructive MTBS and no downgrade from Moody’s, a further interest rate cut of 25 basis points is a possibility at the next MPC committee meeting, which takes place from 19 to 21 November.