Daily Market Report 13 Mar

Daily Market Report – 13 March 2025

Market Update: SA Budget Disappoints, Uncertainty Looms

 

Budget Fallout & Market Reactions

South Africa’s budget was meant to deliver fiscal consolidation and rebuild investor confidence, but instead, it missed the mark by failing to address the fundamental drivers of economic growth. The proposal of a VAT increase, coupled with no major structural reforms, has drawn sharp criticism, setting up a parliamentary showdown.

 

Key Issues with the Budget:

  • Higher tax burden on businesses and individuals.
  • Minimal spending cuts despite inefficiencies in government.
  • No concrete growth strategy to stimulate private-sector investment.
  • Weak fiscal consolidation, with debt servicing costs still rising.
  • Uncertain parliamentary support, meaning the budget may be revised or even rejected.

 

With opposition parties (DA, EFF, MK) rejecting the budget, the ANC lacks enough support to pass it without major negotiations. This adds weeks of uncertainty, which is negative for markets and the ZAR.

 

Market Impact – FX

 

ZAR Struggles Despite Weaker USD

  • USD-ZAR at 18.3275, with resistance at 18.4175.
  • The USD index (DXY) fell after weaker-than-expected inflation data (US CPI at 2.8% y/y).
  • ZAR unable to capitalize due to budget uncertainty and rising global risk aversion.
  • Uncertainty over budget approval = Higher SA risk premium → Potential ZAR weakness.

Short-Term Outlook:

  • If the budget faces major pushback, expect volatility and a test of 18.4000+.
  • If compromises are made, ZAR could find some support, especially with the USD weakening.
  • Global risk sentiment still poor, with Trump’s tariffs sparking global recession fears.

 

Market Impact – Bonds & Interest Rates

 

Bonds Sell-Off, Yields Stay Elevated

  • SA bond yields remain high, reflecting lack of confidence in the budget.
  • No strong reforms = No major demand for SA debt from investors.
  • Debt-service costs now 20%+ of government spending, a worrying trend.

FRAs Show Reduced Rate-Cut Expectations

  • 3X6 FRA: 18bp rate cut priced in (-6bp on the day).
  • 6X9 FRA: 24bp cut (-6bp).
  • 9X12 FRA: 30bp cut (-7bp).
  • 12X15 FRA: 31bp cut (-8bp).

 

Why?

  • Budget uncertainty raises SA’s fiscal risk.
  • Rising bond yields indicate less confidence in lower rates.
  • US yields also rising, meaning global investors still favor USD assets over EM bonds.

 

Global Factors at Play

 

US Inflation Slows, But Fed Stays Cautious

  • US CPI fell to 2.8% y/y, but core inflation still high at 3.1%.
  • Fed is not rushing to cut rates, keeping USD slightly supported.

Trump’s Tariffs Continue to Disrupt Markets

  • More trade war fears → Global equity sell-off.
  • Emerging markets (like SA) hit by risk aversion.

Ukraine-Russia Ceasefire Talks Progress

  • If peace deal advances, expect positive risk sentiment.
  • Could support ZAR, but budget concerns remain dominant.

Key Levels to Watch

  • Support: 18.0350
  • Resistance: 18.4175
  • Break Below 18.0000? → Requires clear fiscal strategy & improving risk appetite.

 

Final Thoughts: What’s Next?

 

Parliamentary Battle Begins:

  • Budget negotiations will dominate headlines for weeks.
  • Expect revisions, delays, and uncertainty → Negative for ZAR & SA markets.

ZAR Needs More Than a Weak USD:

  • For a real rally, SA must deliver policy certainty & investor-friendly reforms.
  • Until then, ZAR remains vulnerable, especially with global risk sentiment worsening.

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