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Some of the good news locally included an easing of consumer inflation from 6.6% in January to 6.3% in February, while producer inflation also slowed to 5.6% in February. The country’s current account deficit also narrowed to its lowest level in six years. On 30 March the SA Reserve Bank kept the repo rate unchanged and signalled that it’s likely reached the end of its interest rate hiking cycle. However, the celebration was short-lived as on that same evening President Jacob Zuma orchestrated an important Cabinet reshuffle, which left Minister Pravin Gordhan without a portfolio. Deputy Finance Minister Mcebisi Jonas was also replaced. Four days later Standard & Poor’s downgraded local currency SA debt to one notch above non-investment (junk) grade and foreign currency SA debt to junk status.

The South African economy is often counter-cyclical to developed and other developing market economies and this theme came through strongly in March. While inflation is easing locally, European consumer prices rose 2% in February from a year earlier. US consumer inflation is back and prices are up 2.7%, the most in four years, while Chinese producer inflation rose by 7.8% from a year earlier. As a result, the Fed hiked the federal funds target range to 0.75-1.0% and the European Central Bank allotted the final round of its zero-interest rate four-year loans.

On a global political level, Prime Minister Theresa May officially launched the Brexit process with a six-page letter hand-delivered in Brussels. The British economy is yet showing little despair in the wake of the unexpected Brexit outcome. UK unemployment even unexpectedly declined to 4.7%, the lowest since 1975, but basic wage growth slowed to 2.3%. In the US, following President Donald Trump’s speech to Congress at the start of March, the Dow Jones broke through the 21 000 barrier for the first time ever.

Despite the political disappointments locally, markets held their own during March 2017. The FTSE/JSE All Share Index (ALSI) gained 2.7% on a total return basis, mostly driven by consumer goods and services, particularly media and telecommunication companies. The SA Listed Property Index eked out 0.1% for the month and the All Bond Index (ALBI) and cash returned 0.40% and 0.63% respectively.

In dollar terms the MSCI World Index gained 1.1% and the MSCI Emerging Markets Index ($) returned 2.5% to dollar investors. For South African rand investors the 2.5% depreciation of the rand against the dollar more than trebled the MSCI World Index gain when converted back to rand.

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