Following the South African Reserve Bank’s Monetary Policy Committee (MPC) decision to reduce its repo rate by 0.25%, FNB gives commentary on the impact of the decision on investments, Agric sector and Franchising:
Impact on Investment portfolios: Chantal Marx, Head of Research FNB Securities
The cut and persistence of the governor’s dovish tone highlights that now might be a good time to consider increasing your exposure to interest rate sensitive stocks locally.
Usually when the reserve bank cuts rates consumers receive some relief in terms of debt repayments and may have a little more to spend on discretionary goods this will be boosted by lower inflation as well.
Interest rate sensitive stock include: clothing, furniture, and car retail and travel and leisure stocks.
Impact on Agriculture: Paul Makube, FNB Senior Agricultural Economist
The decreased interest rate is a welcome breather as it will help ease pressure on farmers and agribusinesses, further improving profitability. The reduced costs of doing business will eventually benefit the consumer in terms of lower food prices.
It will further improve the feasibility of delayed or stalled investment projects which have a potential to unlock employment opportunities in the sector.
Impact on franchising: Riaan Fouché, Head of FNB Franchising International Development
The decreased interest rate will assist with lower debt service costs for franchisees and more cash flow. This enables expansion strategies of Franchisors which will have a positive impact in creating employment within the country. It will also allow franchisees the opportunity to settle existing debt a little quicker than before.
Issued by FNB
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