Market Commentary

  • 28 Feb 2003
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Compiled by: Richard Favis

RBC Capital Markets

+27 11 784 5065

Finance minister Trevor Manuel presented South Africa's budget in parliament yesterday (Thursday) which was well received by local markets that had already absorbed a lower than expected PPI number and a Moody's upgrade for South Africa's long-term foreign currency outlook from stable to positive.

On the back of this the rand pushed through the psychological R8/$ level for the first time since June 2001.

The market was pleased with the budget, which was clearly growth stimulating and once again struck a good balance between poverty alleviation and prudent fiscal management.

Manuel announced R15bn of tax cuts to companies and individuals, greater foreign exchange control liberation by offering amnesty to those that have transgressed foreign exchange regulations by holding undisclosed accounts offshore, the unwinding of blocked emigrant accounts and doubling the foreign investment companies can make into the country to R500m.

GDP growth is forecast at 3.3% for 2003 and is seen picking up to 3.7% in 2004 and 4.0% in 2005. Total budget expenditure rises from R291.8bn in 2002/2003 financial year to R334.0bn in FY2003/2004, R363.3bn in FY2004/2005, and R395.6bn in FY2005/2006, in line with the projections made in October 2002. The budget deficit is expected to be between 2%-2.5% of GDP in FY2003/2004.

Bonds reacted positively to the PPI numbers released earlier in the day. PPI came out at 8.1%y/y from 12.4%, lower than expectations of 9.2%. The better than expected figure sparked rumours of an early interest rate cut in March but most market participants expect the Reserve Bank will wait until CPIX and the global political backdrop have improved before cutting rates.

In the annual budget review Manuel also announced a planned government foreign bond issue equivalent to $1bln during the 2003/2004 financial year. There are also provisions to issue two new domestic bonds maturing 2008 and 2014.

Furthermore, a new CPI-linked bond with a maturity of 30 years is also expected to be issued. In light of the government's tight fiscal stance the bond market has shown no weakness to the proposed new issuance. The R150 closed at 10.958% from 11.068% previously while the R153, due 2010, closed at 10.216% from 10.396% a week ago.

January's trade balance figure is due out today. The surplus is expected to have narrowed to R2.5bn from R6.1bn in December. On Monday money supply figures, the net open foreign currency position and private sector credit extension will be released. Gold and foreign exchange reserve data is due on March 7.

  • 28 Feb 2003

All International Bonds

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 JPMorgan 92.59 388 8.96%
2 Citi 85.30 278 8.25%
3 BofA Securities 63.15 265 6.11%
4 Barclays 58.01 223 5.61%
5 Deutsche Bank 55.74 184 5.39%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 60.87 123 14.06%
2 Credit Agricole CIB 28.59 93 6.60%
3 Santander 25.41 90 5.87%
4 JPMorgan 23.88 61 5.52%
5 UniCredit 21.51 103 4.97%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 Goldman Sachs 2.07 11 10.42%
2 BofA Securities 1.40 6 7.01%
3 Citi 1.37 7 6.87%
4 Morgan Stanley 1.36 6 6.85%
5 JPMorgan 1.31 7 6.59%