EMERGING MARKETS RESEARCH 4November2011 SOUTH AFRICA MORNING SHEET Manufacturing capacity utilisation took a step back in the third quarter, moderating to 79.8% after rising to 81.1% in Q2. This was unsurprising given the significant amount of strike activity in the sector throughout July and the early parts of August. This was reflected in the detailed breakdown from Stats SA under the category other, which includes downtime due to maintenance, lower productivity and seasonal factors. The lower capacity utilisation in Q3 pushes the series even further below its long term average of 83% and is in fitting with the negative momentum growth observed in manufacturing production in the first two months of Q3. Indeed, our 6.7% y/y growth forecast for September manufacturing production (released next week) from 5.6% in August and two consecutive months of above-50 PMI prints suggests a slightly improved backdrop for production. But it is unlikely to be enough to allow the manufacturing sector to contribute positively to Q3 GDP growth (scheduled for release on 30 November). Close Change USD/ZAR 7.87 1.5% EUR/USD 1.38 0.6% EUR/ZAR 10.88 0.9% 3m Jibar 8% 0 bp R157 6.52% 8 bp R186 8.35% 1 bp All Share 32,212 0.0% Gold $/oz 1,764 1.5% Brent $/bbl 111.0 1.4% Source: Reuters, Bloomberg In other news yesterday, Bloomberg headlines regarding the proposed changes to the CPI and PPI baskets caught the market s attention. We point out that these changes are part of the normal 4-5 year revision cycle and markets have been aware of this for some time already. For CPI, the new series should be released in early-2013. The re-weighting will reflect updated consumption patterns as per Stats SA's 2010/11 Income and Expenditure Survey (IES) (which ended in August 2011). This means the weights of the items in the CPI basket will change but remember that "effective" weights will already have been moving in this direction. Higher electricity and food price inflation, for examples, will have seen the related sub-indices rising much faster in the current basket and will therefore 'effectively' have a larger weight. A substantial change in CPI methodology is unlikely (affirmed by Statistics SA) and as a result, we do not expect a significant 'step-change' in the CPI time series. For PPI, there will be a more substantial methodology change, although we believe that this will better explain factory gate price pressures than the current PPI basket. At the very latest, Stats SA has stated that the new PPI will be released by end-2013. Markets: An Italian heads the ECB, buys Italian bonds in his first day in office delivers an unexpected interest rate cut later that same week and the Greek government announces a public referendum, gets cabinet backing for the action and then scraps the plan, all within four days. And the G20 meeting is only half over. It s hard these days to keep up with the newsflow from the EU, but the market response to the last 24 hours is a clear sigh of relief. Equity markets are in the green, currencies (including EM) have strengthened against the euro, and there is some relief in global rates markets. People aren t likely to get too far from their Blackberries in the coming days and weeks, however, as the situation in Europe tries to move from broad agreement on a solution to the practical implementation of the various legs covering Greek sustainability, banking recapitalization, and the assurance of a broader financial backstop for the euro area. Interesting times. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 4 Absa Capital is a division of Absa Bank Limited
GLOBAL OVERVIEW Developed Market Equities KEY: Daily Change 5 Day Change Developed Market 10yr Debt (bp) 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -% 20 10 0-10 -20-30 -40 DOW FTSE DAX NIKKEI AUS US UK DE JP AUS 12,044 5,546 6,133 8,640 4,238 2.074 2.376 1.911 0.984 4.042 Emerging Market Equities Emerging Market Debt (bp) 3% 2% 1% 0% -1% -2% -3% -4% SA Top- 40 BRAZIL MEX TURK POL RUSSIA H KONG 30 20 10 0-10 -20-30 -40 MEX 2026 BZL 2040 TURK 2030 RUS 2030 SA $ 20 28,852 58,196 36,579 56,523 41,314 1,542 19,243 Commodity Prices 4% 2% 0% -2% -4% -6% -8% -10% Opec Basket Source: Bloomberg Brent Future West Med gasoline Singapore gasoline Gold Platinum 108.65 110.83 946.00 118.35 1763.82 1644.25 3.356 8.067 5.659 4.162 4.588 Baa and EMBI+ Spread 450 400 Baa (lhs) EMBI+ (rhs) 350 300 250 200 Nov 10 Jan 11 Mar 11 May 11 Jul 11 Sep 11 450 400 350 300 250 200 Data Releases and Events Highlights (See weekly calendar for details) Country GMT SA time Data Period Latest Forecast Consensus Events Global - - Global: G20 summit in Cannes (final day) Australia 00:30 02:30 Australia: RBA - Statement on Monetary Policy E17 10:00 12:00 E17: ECB Executive Board Member Stark speaks in Germany E17 13:30 15:30 E17: Press conference 3.25 E17 14:00 16:00 E17: ECB Executive Board Member Stark speaks in Dortmund, Germany Data releases Germany 08:53 10:53 Germany: Final services PMI, index Oct 52.1 P 52.1 52.1 E17 08:58 10:58 E17: Final composite PMI, index Oct 47.2 P 47.2 47.2 E17 08:58 10:58 E17: Final services PMI, index Oct 47.2 P 47.2 47.2 E17 10:00 12:00 E17 : PPI, % m/m (y/y) Sep -0.1 (5.9) 0.2 (5.8) 0.3 (5.8) Germany 11:00 13:00 Germany: Factory orders, %m/m (y/y) Sep -1.4 (3.9) -0.5 (6.9) 0.5 (7.9) US 12:30 14:30 US: Nonfarm payrolls, chg, k Oct 103 100.0 100.0 US 12:30 14:30 US: Private nonfarm payrolls, chg, k Oct 137 12 12 4 November 2011 2
FOREIGN EXCHANGE Forex Spots Unit $ Change R Change Rand Forwards Term Forward Points Outright Forward cover Forward rate cost (ann.) USD 1.00-7.870 1.51% 1 month 0.035 0.004 0.031 7.904 5.4% GBP 1.60 0.58% 12.624 0.93% 3 months 0.103 0.011 0.092 7.973 5.2% EUR 1.38 0.55% 10.880 0.92% 6 months 0.194 0.020 0.174 8.063 4.9% JPY 78.06-0.01% 9.917 1.54% 9 months 0.283 0.029 0.254 8.153 4.8% CHF 0.88 0.72% 8.968 0.76% 1 year 0.372 0.039 0.333 8.242 4.7% AUD 1.04 0.67% 8.200 0.80% Source: Bloomberg CAD 1.01 0.69% 7.817 0.82% HKD 7.77 0.03% 1.013 1.47% Rand Options THB 30.63 0.52% Option Implied Volatilty Price as a % of Term IDR 8970-0.02% $ nominal Change MXN 13.33 1.53% 1 month 24.2% 24.8% -0.6% 2.8% -0.1% BRL 1.74 0.43% 3 months 23.9% 23.8% 0.1% 4.8% 0.0% TRY 1.75 1.47% 6 months 23.6% 23.6% 0.0% 6.6% 0.0% PLN 3.14 1.36% 9 months 23.4% 23.4% 0.0% 8.0% 0.0% CZK 18.05 1.44% 1 year 23.4% 23.4% 0.0% 9.2% 0.0% Source: Reuters Source: Bloomberg, all rates are mid rates Nominal Effective Exchange Rate of the Rand (Trade weighted Rand) SA Fuel prices Date Value % YTD Date Value Gauteng 95 Diesel Rands per Litre 04 Nov 11 65.86-14.24% 1 month ago Octane 0.005% 03 Nov 11 65.86-14.24% 4 Oct 11 65.47 This month 10.77 10.01 02 Nov 11 65.86-14.24% 12 months ago Last Month 10.54 9.65 01 Nov 11 65.47-14.75% 4 Nov 10 76.80 Change 0.23 0.36 31 Oct 11 66.86-12.94% End of last year *Average Unit over/(under) recovery (c/l) 10.40 (33.87) 28 Oct 11 67.29-12.38% 30 Dec 10 81.57 27 Oct 11 66.56-13.33% Note: *A fuel price over recovery indicates that the next price changeis likely Source: SA Reserve Bank to be down and vice versa for an under-recovery MONEY MARKET General SARB Repo Rate Prime Interest Rate Last Previous Date of last 3 Nov 11 2 Nov 11 change 0 0 18 Nov 10 9.00 9.00 18 Nov 10 8.0 Source: CEF Chart: SARB Repo rate and 3-month Jibar SARB Repo Jibar Johannesburg Interbank Agreed Rates (Jibar) SAFEX Overnight Rate 5.25 5.25 0.0 1-month Jibar 5.43 5.43-0.5 3-month jibar 8 8 0.0 6-month Jibar 5.73 5.73 0.0 1-year Jibar 5.89 5.89-0.5 Negotiable Certificates of Deposit (NCDs) 3-month NCD 5.48 2-4.5 6-month NCD 5.45 2-9-month NCD 5.46 2-6.0 12-month NCD 7 5.62 - Sources: Reuters, Bloomberg International Money market rates: US dollar libor USD Overnight 0.14 0.14-0.1 USD 1-month 0.25 0.25 0.2 USD 3-months 0.44 0.43 0.2 USD 6-months 0.63 0.62 0.3 USD 9-months 0.78 0.78 0.4 USD 1-year 0.94 0.94 0.3 Fed Funds target Rate Source: Reuters 0.25 0.25 0.0 7.5 6.5 6.0 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Chart: Fed Funds Target rate and 3-month USD Libor 0.6 Fed Funds Libor 0.5 0.4 0.3 0.2 0.1 0.0 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 4 November 2011 3
INTEREST RATES All Bond Index Government Primary Dealer Bonds Bond Details Albi Last BESA m-t-m Change Trading stats for 3-Nov-11 Issuer/coupon rate/maturity weighings 3-Nov-11 (bp) Open High Low Last This Morning R206 RSA 7.50% Jan 2014 4.75% 5.825-9.5 R206 5.910 6.010 5.825 5.825 - R201 RSA 8.75% Dec 2014 5.84% 6.090-10.0 R201 6.200 6.200 6.055 6.055 - ES15 Eskom 7.75% Aug 2015 0.74% 6.895-7.5 R157 6.612 7.190 6.489 6.500 - R157 RSA 13.50% Sep 2015 9.21% 6.515-7.5 R203 7.450 8.567 7.260 7.260 - WS04 TCTA 12.50% May 2016 1.45% 6.875-7.5 R204 7.660 7.672 7.570 7.585 - R203 RSA 8.25% Sep 2017 10.28% 7.285-7.5 R207 7.890 8.000 7.752 7.760 - ES18 Eskom 9.25% Apr 2018 1.27% 8.055 - R208 7.955 8.010 7.850 7.884 - R204 RSA 8.00% Dec 2018 10.19% 7.585 - R186 8.408 8.445 8.250 8.330 R207 RSA 7.25% Jan 2020 12.02% 7.835-3.5 R213 8.850 8.861 8.805 8.805 HWAY20 SANRAL 9.75% Jul 2020 1.06% 8.405-3.5 R214 No Spot Trade TN20 Transnet 10.50% Sep 2020 0.70% 8.970-6.0 R208 RSA 6.75% Mar 2021 10.75% 7.863-6.4 ES23 Eskom 10.00% Jan 2023 1.83% 8.440 - DV23 DBSA 10.00% Feb 2023 1.06% 9.235-1.5 Government Inflation Linked Bonds ES26 Eskom 7.85% Apr 2026 2.27% 8.955-1.5 Trading stats for 3-Nov-11 Last BESA R186 RSA 10.50% Dec 2026 13.41% 8.345-1.5 Open High Low Last m-t-m R213 RSA 0% Feb 2031 2.19% 8.805-0.5 R189 0.150 0.150 0.098 0.107 0.090 ES33 Eskom 7.50% Sep 2033 2.24% 9.435 0.5 R211 1.300 1.300 1.280 1.280 1.280 R209 RSA 6.25% Mar 2036 6.77% 8.835 0.5 R212 2.490 2.500 2.470 2.480 2.480 R214 RSA 6.50% Feb 2041 1.98% 8.930-1.5 R197 2.480 2.480 2.480 2.480 2.480 R210 2.680 2.680 2.680 2.680 2.680 Albi yield Weighted average MTM yield 100.00% 7.699-4.8 R202 2.670 2.680 2.670 2.670 2.670, Bloomberg Albi Total Return Index - 371.19 0.23% Govi Total Return Index - 1.28 0.00% BarCap/Absa SAGovt. Inflation Linked bond index, latest yields-to-maturity from Reuters 8.33-0.89% Bond Trading Data Total Non Repo Trades for the main government funding stocks (ZAR mn) BESA day's non-repo trade volumes 3-Nov-11 week-to-date month-to-date year-to-date (R mn) by time R206 R201 R157 R203 R204 R207 R208 R186 R213 R209 1,553 675 10,361 2,008 1,653 13,372 12,348 3,825 838 1,610 3,251 831 32,621 4,965 5,960 19,568 16,706 9,991 3,703 5,429 2,134 821 29,507 4,416 5,796 18,813 16,244 8,463 3,541 5,189 197,072 109,091 2,274,364 297,521 252,827 377,425 521,997 675,882 79,798 220,408 07:00 08:00 09:00 10:00 11:00 R214 479 2,463 2,180 72,990 12:00 Total client trades on BESA (ZAR mn) Bond Exchange Total Volumes Local Clients Foreign Clients Nominal amount traded (ZAR bn) 13:00 R206-1.11 2 Daily 3-Nov 82 48 14:00 R201-31.46-107 Week to date 4-Nov 358 425 R157 1,357.58-591 Month to date Nov-11 306 1,702 15:00 R203-117.16-237 Year to date 2011 18,106 16,901 123.76 2,635.39 143 291 R204 R207 Net Foreign purchases / sales of SA bonds 16:00 R186 322.98 64 Daily 3-Nov 7 763 R208-71.38 374 (ZAR mn) latest & Previous 17:00 R213 23.90 57 Week to date 4-Nov 87 3,138 Bond Exchange Cash Flows R209 92.01 179 Month to date Nov-11-301 9,599 R214 30.75 8 Year to date 2011 45,133 57,064 0 2,000 4,000 6,000 8,000 Monthly Coupons and Maturities for the next twelve months (ZAR mn) Five Largest Coupon Payments for November 2011 (ZAR mn) Month Coupons Redemptions Date Issuer Amount October 1,842 7,043 ES26 2 Oct 11 Eskom Holdings Limited 597 November 2,224 8,792 ES18 20 Oct 11 Eskom Holdings Limited 402 December 12,401 4,822 NRA022 31 Oct 11 South African National Roads 177 January 6,112 1,237 OML01 27 Oct 11 Old Mutual Life Assurance 134 February 4,238 2,627 AIR02 30 Oct 11 Airports Company South Africa 100 March 16,198 9,502 April 1,720 2,653 Four Largest Maturities for November 2011 (ZAR mn) May 2,111 2,043 Date Issuer Amount June 11,345 5,807 MBF023 7 Oct 11 Mercedes-Benz South Africa 1,300 July 6,105 6,612 BLG3A2 30 Oct 11 Blue Granite Investments No.3 1,022 August 4,115 1,623 SMF2 14 Oct 11 Sappi Southern Africa (Proprietary) 1,000 September 15,027 7,094 BLG3A3 30 Oct 11 Blue Granite Investments No.3 930 Fras and Swaps South Africa FRAs curve South Africa Swap curve 5.7 5.6 5.4 5.3 5.2 5.1 3-m Jibar 1x4 2x5 1 day change (rhs) FRA curve (lhs) 3x6 4x7 5x8 6x9 7x10 8x11 9x12 12x15 3.0 1.0-1.0-3.0 - - -9.0-11.0-13.0 8.0 7.5 6.5 6.0 1-yr 2-yr 3-yr 1 day change (rhs) Swap curve (lhs) 4-yr 5-yr 6-yr 7-yr 8-yr 9-yr 10-yr 2.0-3.0-8.0-13.0 8 5.37 5.35 5.24 5.22 5.18 5.16 5.16 5.17 5.19 5.29 5.29 5.45 5.82 6.19 6.55 6.82 5 7.23 7.35 7.42 4 November 2011 4
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