The last quarter was a positive one for all asset classes. The equity market delivered 7.2%, listed property 7.9%, bonds 4.7% and cash 1.9%. The positive growth was largely supported by the strong net purchases of SA equities and bonds by foreigners which is supporting the rand for the moment, this is however bound to slow down.

The areas for concern are the sharp decline in the balance on the financial account and the negative trend in unrecorded transactions in Q1 2005 serves as confirmation of the changing climate for capital flows. And secondly the decline in the Gross domestic product which indicates a falling manufacturing of nearly 2% during the first quarter and the SARB leading indicator also turned down sharply. However the current expansionary fiscal policy, low interest rates and still buoyant consumer and business confidence are all expected to keep the local upswing going through out the remainder of the year and into 2006.

Local long-bond yields dropped from 8.45% to 8.00% during the month. At the June SARB repo rate meeting, the repo rate was left unchanged, based on the expectation that inflation would remain within the target range despite the higher oil prices and a weaker rand. Towards the end of May, the CPIX was close to 3.9% which was almost 0.3% lower than expectations. The current forecasts for the rand would suggest a substantially weaker currency for the next two years, this is largely as a result of the dramatic change in the dollar/euro outlook and the China story.

In the last week of June, Gold posted a strong rally closing at a three month high of close to US$440/oz. The latest rallying old can be explained to some extent by the record high oil prices. Oil priced also rallied higher, with oil futures hitting record highs of US$60/barrel. The oil price was driven by fears that OPEC would be unable to further increase production and the robust demand for oil and oil derivatives. US data also suggests that US reserves had declined for a third consecutive week.