Financial Markets

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Financial market update

Quantifying financed emissions is a critical first step in building trust that financial institutions are integrating climate change concerns into their core business and that net zero pledges are being taken seriously.

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What lies behind the recent Rand strength

Vulnerabilities prior to Covid19 meant that investor sentiment around South Africa (SA) was particularly fragile. The severity of the pandemic itself, further eroded investor sentiment, thereby weakening the rand and increasing market volatility. During this time, we saw the USDZAR trading at over R19/$. In recent weeks, however, the rand has gained substantial strength, and is now trading below R14/$. In this blog, we explore some of the reasons for the rands remarkable recovery. These include: 1) Dollar weakness on the back of global markets balancing US fiscal and monetary policy. 2) High real interest rates offered in SA, which continue to attract offshore investments and capital. 3) A historic current account surplus on the back of strong commodity prices; and 4) Stronger-than-expected tax revenue data easing growth concerns. With global risks such as rising US inflation at bay for now, the rand may continue to benefit. The rand may also find support from a continued commodities upswing which is supportive of the trade balance and growth. However, local risks remain. SA’s economic growth is still a source of concern for investors. SA still faces serious fiscal challenges, including large government debt and tricky negotiations around the public sector wage bill. Adding to this, the slow start to the COVID19 vaccination programme and the threat of a third Covid-19 wave could add downward pressure to overall investor sentiment. These real economy risks may limit future rand strength.

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Trends in consumer financial education in South Africs

There has been a significant effort among financial institutions to drive consumer financial education (CFE) programmes in line with the GN500 requirements. This blog undertakes an analysis across 14 banks and insurers and identifies four key trends in CFE programmes across target audience, delivery modes, monitoring and evaluation, and novel approaches. Financial institutions need to continue refining their CFE programmes to deliver the highest impact to improve financial literacy among South Africans.

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When inclusive bank lending becomes harmful to consumers

Well-functioning financial systems support the functioning of all components of the economy, by facilitating transactions and the flow of resources between deficit and surplus economic units (Mishkin, 2007). A key asset of the South African economy is its well-developed financial systems. However, the regulation of such systems is a complex task, and regulatory failures in financial systems pose large risks for the wider economy. Given these concerns, it is interesting to examine some of the characteristics of the South African financial system, especially as regards consumer indebtedness.

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Bitcoin: digital insulation from sovereign risk?

It can be argued that Bitcoin has the potential to safeguard the value of your savings, depending on the relative state of each currency. The digital asset has been maturing for almost a decade and our analysis demonstrates that it appears to act as a safe haven in the face of adverse macroeconomic conditions, thus far.

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Salvage value and the uncertainty of write-off thresholds

In taking out car insurance, we like to believe that our insurer will always act in our best interests, and would not write-off a client’s vehicle unless they absolutely had to. In truth, however, the interests of the insurer and the insured are not always perfectly aligned and may at times be diametrically opposed to each other. This problem can become particularly perverse when insurers include the salvage value of a vehicle into their decision-making process.

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The National Credit Act: is the regulation of payday lending sufficient?

The recent spate of newspaper articles detailing the level of indebtedness of South African consumers is a cause for concern. Is it driven by the actual need of citizens, or by the increasing ease with which short term, high cost credit can be accessed, given that limited credit checks are conducted on those who access them?

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Spreading the gains from regional financial sector reforms

In 2012, the SADC launched negotiations on the liberalisation of trade in services for six priority sectors, including banking and other financial services. It is expected that these negotiations shall be finalised within three years. In theory, the liberalisation of trade in banking services is expected to improve service quality as well as access to banking services. In practice, the experience of many Southern African countries does not always stand up to the theory.

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Increased financial openness in SADC – an invitation for trouble?

Recent and dramatic changes in global financial markets have had disastrous effects on some less developed countries in Africa. Although these countries may not have strong and direct financial sector linkages with the rest of the world, their dependency on a limited number of primary sector goods has exposed them to changes in world demand, resulting in a slowing of growth. There is some risk that a prolonged global slowdown might reverse the successes attained in overcoming the food and fuel crises of the 1990s and bring social and economic development to a halt. These challenges raise questions about the rationale (or at least the timing) of global and regional efforts to deepen economic integration.

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Why Greece doesn’t matter…and does

Following a second bailout of Greece earlier this week, the likelihood of immediate default and contagion effects have diminished in the short-term, though the EU region’s structural debt problems along with the possibility of a future default remain. The Greek (and EU) debt crisis will have a significant impact on South Africa’s economic prospects through various different channels. Most directly, South African exports to Greece are likely to suffer. But does this really matter?

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