Daily Equity Report

Inflation numbers for January reflect a slightly lower year on year increase. Going forward the electricity hikes over the next 3 years will prove to be a huge headwind, especially where these costs are passed through to consumers. The January inflation number came in at 6,2% year on year, down ever so slightly from December’s 6,3% year on year official inflation.

The National Energy Regulator of South Africa (Nersa) who has been deliberating on Eskom’s proposed 3 year price hikes on electricity for some time, came out with an agreed rate hike more in line with the consensus.

The initial application in September last year from Eskom was 45% per annum and in November this was revised to 35% per annum over the next 3 years.

After considering all submissions, oral and written, facts and evidence provided, Nersa approved a 24,8% price hike from 1 April this year, 25,8% in 2011 and 25,9% in 2012. These percentages are on the average standard tariff.

Nedbank’s unit believe that this hike will add 0,45% to inflation, which is lower than the possible 0,65% had the rate hike been agreed at 35%.

Inflation for February should come in below the 6% upper limit, with the consensus expecting around 5,5%.

Source : Nedbank Economic unit

According to Nedbank, the year on year hike in electricity and other fuels as a line item of the total inflation data, over the last 12 months was 23,9%, while the average year on year over the past 3 years for this category coming in at 20,88%.

The local equity market fell back slightly on the day.

The rand was weaker against the dollar – last trading at R7,75/dollar.

Bonds were firmer with the yield on the R157 trading at 8,26%

Kind regards

Ian de Lange
info@seedinvestments.co.za
www.seedinvestments.co.za
021 9144 966