THE DAILY BRIEF MARKETUPDATE MONDAY,18JANUARY2021 GLOBAL MARKETS - CAPRICORN PRIVATE WEALTH

The Daily Brief

Market Update                                             Monday, 18 January 2021

Global Markets
Shares pared early losses on Monday as data confirmed China's economy had bounced back last
quarter as factory output jumped, helping partially offset recent disappointing news on U.S.
consumer spending.

Chinese blue chips gained 0.8% after the economy was reported to have grown 6.5% in the fourth
quarter, on a year earlier, topping forecasts of 6.1%. Industrial production for December also beat
estimates, though retail sales missed the mark. "Despite the latest dip in retail sales, we see plenty
of upside to consumption as households run down the excess savings they accumulated last year,"
said Julian Evans-Pritchard, senior China economist at Capital economics. "Meanwhile, the tailwinds
from last year's stimulus should keep industry and construction strong for a while longer."

MSCI's broadest index of Asia-Pacific shares outside Japan trimmed losses and were off 0.3%, having
hit a string of record peaks in recent weeks. Japan's Nikkei slipped 0.8% and away from a 30-year
high. E-Mini futures for the S&P 500 dipped 0.2%, though Wall Street will be closed on Monday for a
holiday. EUROSTOXX 50 futures eased 0.2% and FTSE futures 0.1%.

The pick-up in China was a marked contrast to the U.S. and Europe, where the spread of coronavirus
has scarred consumer spending, underlined by dismal U.S. retail sales reported on Friday. Also
evident are doubts about how much of U.S. President-elect Joe Biden's stimulus package will make it
through Congress given Republican opposition, and the risk of more mob violence at his
inauguration on Wednesday.

"The data bring into question the durability of the recent move higher in bond yields and the rise in
inflation compensation," said analysts at ANZ in a note. "There's a lot of good news around vaccines
and stimulus priced into equities, but optimism is being challenged by the reality of the tough few
months ahead," they warned. "The risk across Europe is that lockdowns will be extended, and U.S.
cases could lift sharply as the UK COVID variant spreads."

That will put the focus on earnings guidance from corporate results this week, which include BofA,
Morgan Stanley, Goldman Sachs and Netflix. The poor U.S. data helped Treasuries pare some of
their recent steep losses and 10-year yields were trading at 1.087%, down from last week's top of
1.187%.

The more sober mood in turn boosted the safe-haven U.S. dollar, catching a bearish market deeply
short. Speculators increased their net short dollar position to the largest since May 2011 in the week
ended Jan. 12. The dollar index duly firmed to 90.816, and away from its recent 2-1/2 year trough at
89.206. The euro had retreated to $1.2074, from its January peak at $1.2349, while the dollar held
steady on the yen at 103.78 and well above the recent low at 102.57. The Canadian dollar eased to
$1.2773 per dollar after Reuters reported Biden planned to revoke the permit for the Keystone XL oil
pipeline.

Biden's pick for Treasury Secretary, Janet Yellen, is expected to rule out seeking a weaker dollar
when testifying on Capitol Hill on Tuesday, the Wall Street Journal reported.

Gold prices were undermined by the bounce in the dollar leaving the metal at $1,828 an ounce,
compared to its January top of $1,959. Oil prices ran into profit-taking on worries the spread of
increasingly tight lockdowns globally would hurt demand. Brent crude futures were off 52 cents at
$54.58 a barrel, while U.S. crude eased 44 cents to $51.92.

Domestic Markets
South Africa's rand weakened against the U.S. dollar on Friday, in line with other emerging market
currencies, as currency markets turned risk-averse to the benefit of the greenback.

At 1510 GMT, the rand traded at 15.3000 versus the dollar, 1.41% weaker than its previous close.

The rand has had a volatile week, falling one day and firming the next, mainly taking its cue from
global factors.

Comments by President Cyril Ramaphosa on Monday that the country had secured more COVID-19
vaccines lifted the market's mood temporarily, but details as to when the vaccines would arrive and
who would supply them are still scarce.

This week, attention will turn to the South African Reserve Bank's (SARB) first monetary policy
meeting of 2021. Most analysts polled by Reuters predict the bank will keep its main lending rate on
hold at 3.5%, but a small minority have pencilled in a rate cut.

"Given how the dollar is set to weaken on the reflation trade and Federal Reserve is keen to
maintain its ultra-accommodative monetary stance into the foreseeable future, the outlook for the

rand remains encouraging," said FXTM senior research analyst Lukman Otunuga. "However, South
Africa is still dealing with COVID-19 while extended lockdowns threaten the economic outlook for
2021. Given how the SARB is likely to leave interest rates at a record low of 3.50% this quarter, this
may hinder the rand's gains."

Another cut could hurt the rand by making investing in local assets less attractive.

Stocks on the Johannesburg Stock Exchange (JSE) reversed some of the prior day's gain following
Asian markets, which were down on tensions of rising cases of coronavirus and as President-elect
Joe Biden's aid package sparked worries of higher taxes. The FTSE/JSE all-share index ended the
week down 0.52% at 63,550 while the FTSE/JSE top-40 companies index closed down 0.49% at
58,446.

Government bonds weakened, with the yield on the benchmark 2030 up 6.5 basis points at 8.83%.

Corona Tracker

                       The number of new cases is distorted by cut-off times.

Source: Thomson Reuters

Market Overview

Notes to the table:
    The money market rates are TB rates
    “BMK” = Benchmark
    “NCPI” = Namibian inflation rate
    “Difference” = change in basis points
    Current spot = value at the time of writing
    NSX is a Bloomberg calculated Index

Important Note:
This is not a solicitation to trade and CAM will not necessarily trade at the yields and/or prices
quoted above. The information is sourced from the data vendor as indicated. The levels of and
changes in the yields need to be interpreted with caution due to the illiquid nature of the domestic
bond market.

                                                                                 Source: Bloomberg

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Disclaimer
The information contained in this note is the property of Capricorn Asset Management (CAM). The
information contained herein has been obtained from sources which and persons whom the writer
believe to be reliable but is not guaranteed for accuracy, completeness or otherwise. Opinions and
estimates constitute the writer’s judgement as of the date of this material and are subject to change
without notice. This note is provided for informational purposes only and may not be reproduced in
any way without the explicit permission of CAM.