Prowess Investments Market Update 16-20 January 2023   

This week, all eyes will be on the SA Reserve Bank’s Monetary Policy Committee (MPC), which is expected to increase the Repo rate by 50 basis points. The Repo rate has increased cumulatively by 350 basis points (bps) since the start of the rate-hiking cycle in November 2021. Meanwhile the World Economic Forum report states that the outlook for the global economy is “gloomy”, with China posting its weakest economic growth in nearly half a century and the US battling to tame inflation.

International Market Developments


The softer US CPI in December, together with favourable outcomes in the preceding two months, gives the Fed room to hike rates by smaller increments when meeting at the end of January. Federal Reserve Vice Chair Lael Brainard has echoed other policymakers’ views that US interest rates would need to stay elevated for some time to further tame inflation, which remains too high despite showing signs of slowing down. The FOMC interest rate decision is expected on 1 February.

Recession Risk

China posted its weakest economic growth in nearly half a century as GDP growth came in at 3% in 2022 compared to 8.1% in 2021. China kept to its “Covid Zero” policy for most of 2022, which dampened output across the nation. Despite the slowdown, the data was better than the World Bank forecast of 2.7% and with the late-2022 U-turn in COVID policy there is optimism that China’s economy is on the way to recovery.

Globally, the World Economic Forum’s latest report  states that the outlook for the world economy is “ gloomy”, with almost one in five respondents now considering a global recession to be extremely likely in 2023, more than twice as many as in the previous survey in September 2022.

Local Market Developments

The Bureau for Economic Research (BER) published its Q4 22 inflation expectations survey. The Q4 22 survey revealed a setback, with inflation expectations rising across all time horizons and remaining well above the mid-point of the target range. These expectations are an average of results from analysts, businesses and labour unions.

The December CPI provided a more positive view of the inflation picture and showed that Headline CPI was 7.2% y/y, in line with expectations. Core CPI came out lower at 4.9% y/y versus expectations of 5.1%y/y. This was reflective of further softening in food and fuel prices, while core inflation declined due to lower rental increases.

The Reserve Bank’s Monetary Policy Committee (MPC) sits this week and will deliver its Repo rate decision on Thursday afternoon. The Thomson Reuters analyst consensus is narrowly for the MPC to hike the Repo rate by 50bp.

President Ramaphosa convened a meeting with leaders of political parties represented in parliament, NECCOM (the National Energy Crisis Committee), and the Eskom board. The Energy Crisis Committee is working to develop emergency legislation to allow energy projects to proceed more quickly and enable co-ordinated and decisive action.

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