An equity and property friendly budget
The budget finance minister Enoch Godongwana tabled on Wednesday has been welcomed by experts as positive for key asset classes.
The budget is more equity than bond-friendly relative to expectations, said Chantal Marx, head of investment research at FNB wealth and investments.
She highlighted that the rand strengthened during the speech, the equity market picked up, and bond yields came slightly across the curve.
Andre Botha, a currency dealer at TreasuryOne, told Daily Investor the rand was trading 20 cents stronger to the dollar after the speech.
However, the US Federal Reserve released the minutes of a committee meeting moments after the speech, which saw the dollar trading firmer against most currencies. This gave up the gains made by the rand, said Botha.
Marx said tax relief for personal income taxpayers, support for electricity supply, and a limited impact on fuel prices are positive news for equities.
The corporate tax rate will also decrease by a percentage point next month which is good for the equity market.
The JSE top 40 index rallied slightly as the budget was announced but finished the day’s trading lower than at the start of the budget.
Marx said debtholders would welcome a sustained commitment to debt consolidation and that budget deficits are forecasted to be slightly smaller than expected.
“A primary surplus this year along with further surpluses forecast will be good news for bondholders, but gross government debt will now peak later and higher than expected due to lower growth estimates, a weaker rand, and the take-over of Eskom debt,” said Marx.
10-year government bond yields fell from 10.26% at the start of the day to 10.15% at the close of trading.
Rhys Dyer, CEO of ooba Group, said the solar incentive scheme introduced by the government whereby individuals can claim a 25% tax rebate on the value of solar panels should benefit property owners.
“Investing in renewable energy such as solar power is a good way to build equity in your home,” he said.
Yael Geffen, the CEO of Lew Geffen Sotheby’s International Realty, said the commercial and individual solar incentive schemes are the best news for businesses and homeowners.
He said these schemes “will be a huge incentive to get off the grid and make businesses more sustainable in the long term”.
Geffen also welcomed the expansion of the transfer-free tax brackets by 10%.