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April 2023 Update

Making the News

The Month began with a falling Purchasing Managers Index revealing the contraction in the manufacturing economy stemming from continuous load-shedding. Although the national treasury reported that gross tax revenue had increased by +7.5% y-o-y, the monthly budget balance deficit had increased by more than R20bn relative to last year. Close to month end, the SARB hiked rates by 50 basis points, a move that shocked markets.

This month’s global focus was on the stability and soundness of commercial banks as well as the threat of financial contagion – beginning with the closure of Silicon Valley Bank (SVB) after a liquidity crunch and heavy losses on their bond holdings following the spike in US interest rates. Capitec posted -4% losses on their shares after SVB was shut down indicating that the domestic economy was not unscathed by the global sentiment.

The US authorities stepped in to secure the deposits of SVB’s clients to reduce the potential of panic in an attempt to control the banking contagion. Unfortunately, Credit Suisse soon followed SVB’s suit after the release of an adverse auditor’s report which included material weaknesses, which ultimately resulted in UBS buying Credit Suisse out.

The Fed chair concluded during a Q&A that the US lending standards are likely to experience further tightening and suggested another interest rate hike of 25bps. Meanwhile in Europe stubbornly high core inflation data (6.3% y-o-y) suggests that the Bank of England will continue the fight against inflation.

Despite the EFF protest the month ended with the JSE Alsi being up 3% w-o-w ,while the FNB/BER Consumer Confidence Index collapsed to its 3rd lowest point since 1994 indicating the pessimistic sentiments regarding the economy and consumer spending plans.

March 2023 Update
May 2023 Update