BUSINESS CONFIDENCE
Hold on interest rates stumps hedges and retailers
The unexpected decision to keep rates on hold last week has put the JSE in a quandary about the road ahead, with a further bias to weakness in equities evident despite a firmer rand. A firmer rand usually supports banks and retailers and a weaker currency, the rand hedges. But neither may be benefiting from the Reserve Bank’s new holding stance after surprisingly cutting the repo rate from 7% to 6.75% in July. Banks and general retailers rallied earlier last week ahead of the Bank’s expected decision to reduce interest rates by 25 basis points. The market was marginally weaker to flat in response, while industrials were lower as the rand hedges mulled the slightly firmer rand. Analysts say there is increasingly less room for the Bank to cut rates, so an expected recovery in stocks that are sensitive to interest rates may be muted. The Bank’s view on inflation does not give confidence that a firmer rand will result in lower inflation, which may have supported further rates cuts. Cons...
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