JSE may rebound with Asia after three-day slump

The JSE may end its three-session slide on Wednesday, judging from a rebound in Asian markets.

Hong Kong’s Hang Seng index was up 0.4%, helped by Naspers’s 31%-owned associate Tencent rising 0.8% to HK$400.

Sydney’s ASX 200 index was also up 0.8%, with BHP rising 0.12% to A$32.40.

Wednesday’s focus will be on inflation, which is expected to have accelerated further in May after jumping to 4.5% in April from 3.8% in March, as the effects of higher VAT and fuel levies took their toll.

The rand was trading at R13.73 to the dollar on Wednesday morning, a recovery from the R13.92 to the dollar it weakened to on Tuesday.

The local currency was trading at R15.89 to the euro and R18.07 to the pound at 6.30am.

Statistics SA is scheduled to report May’s inflation, as measured by the annual change in the consumer price index (CPI), at 10am.

Investec Bank economist Lara Hodes forecasts May’s inflation will be higher than economists’ consensus of 4.6%, coming in at about 4.8%.

“In terms of the key dynamics affecting the inflation outcome, the inflationary effect of the higher oil price, combined with a weaker domestic currency continued to exert upward pressure on fuel prices in May, with petrol and diesel prices rising by 49c a litre and 59c a litre respectively,” Hodes said in her weekly note e-mailed on Friday.

“Additionally consumer taxes, introduced in April, would have continued to weigh on the inflation outcome.”

The Reserve Bank’s monetary policy committee, which uses forecasts of inflation as its key measure to set interest rates, is scheduled to announce its next decision on July 19. It currently has its repo rate set to 6.5%, and commercial banks add 3.5 percentage points to quote their benchmark prime rate at 10%.

“We estimate that the long-term structural inflation rate in SA is around 5.5% and continue to forecast a 25 basis point hike in the repo rate in January 2019, another in March 2019 and a further 25 basis point lift in 2020 in order to return SA interest rates to neutral levels,” Hodes said.

Increases adding up to 75 basis points would take the repo rate to 7.25%.

Diamond miner Trans Hex issued a trading statement on Tuesday saying it expected to report on Wednesday that its headline loss per share nearly doubled to 216.5c for the year to end-March from 114.6c in the prior year.