GTC Trendline – September 2013
Credit growth surprises market
The growth of 1.6% (R39bn) in private sector credit during the month of August surprised market economists as the previous recording was a decline of 0.3% (R7bn) in July 2013. On an annual basis, private sector credit grew by
8.2% whilst the market expected just 7.2%. The major contributors were the increases in corporate credit which grew by over R30bn month on month and a renewed mortgage sector which added around R7bn to credit growth extension. This is the highest growth in mortgage loans since 2010.
The mortgage sector credit growth shows consumers have returned to the local property market but the levels of credit extension are still restrained relative to the heydays between 2005 and 2008. Over the past 12 month mortgage credit has risen by a total of just over R22bn, which is still a long way from the R160bn in 2007 and R113bn of 2008. Economists have also noted the increase in residential building plans passed, which further supports the consumer taking on mortgage credit to finance new houses, renovations and extensions to existing houses.
Release of the Taxation Laws Amendment Bill 2013 (TLAB)
The Taxation Laws Amendment Bill, 2013 was published for comment on 4 July 2013. The proposals will only become law once promulgated into a final Act and we will update this note at that time. Whilst the Bill involves more matters than retirement funds and long term insurance policies, this note focuses on these matters.
GTC fund performances
The GTC Fixed Income Fund has performed in excess of cash rates over all annualised reporting periods. Despite the low cash rate environment, the manager has maintained a higher yield relative to the benchmark through the use of credit and duration. The manager has also protected the average credit rating of the instruments, maintaining an above investment grade rating. Although there has been an increase in recent months in inflation, this is unlikely to result in higher interest rates as the price volatility is caused by administered prices and not consumer demand led inflation.
