The Week Ahead

24 September - 28 September

Global equity markets

Local data

The South African Reserve Bank (SARB) kept lending rates unchanged this week at the conclusion of the Monetary Policy Committee (MPC) meeting. The decision by policy makers was not however unanimous with three out of the seven members voted for an incremental rate hike of 25 basis points (0.25%).

Some of the key takeaways from the Reserve Bank are as follows:

  • The MPC assesses the rand to be undervalued at current levels, but it is expected to remain volatile along with other emerging market currencies
  • Headline Inflation expected to average at 4.8% in 2018
  • Forecast for economic growth in 2018 revised down to 0.7% from 1.2% previously (July)
  • The MPC considers the current stance of monetary policy to be accommodative

In a separate public address, South African president Cyril Ramaphosa, has outlined a basic stimulus and recovery plan aimed at stemming job losses and restoring investor confidence in the Country. Some of the key features of this plan include:

- Setting up a new R400bn infrastructure fund

- Reducing port and rail tariffs as well as administrative electricity charges to reduce business costs

- Remove the Minerals and Petroleum Resources Development Act and release the new mining charter

- Reprioritise existing budgets to focus on agriculture, townships, hospital equipment and school sanitation

International data

While the trade war narrative persists, equity markets across the globe have managed to stay buoyant this week.

US president Donald Trump announced that the additional 10% in tariffs proposed on $200bn of worth of Chinese imported goods would go ahead (as of the 24th of September), despite threats from Chinese authorities that they would walk away from bilateral trade talks should these duties be imposed. The US has threatened to target a further $267bn in Chinese imports should the region retaliate. China did retaliate with new duties announced on $60bn of US goods. China did not however follow through on threats to walk away from upcoming traded talks with the US.

It would appear that markets have been pricing in a heavier increase (25%) in tariffs from the US as well as the suggested break down in trade talks. The fact that these scenarios have not yet manifested is perhaps providing some reprieve to equity and commodity markets in the short term.

Economic Calendar

Date Time Currency Event Previous
25 September 16:00 USD CB Consumer Confidence 133.4
26 September 03:00 NZD ANZ Business Confidence -50.3
26 September 16:30 USD Crude Oil Inventories -2.1m
26 September 20:00 USD FOMC Economic Projections
26 September 20:00 USD FOMC Statement
26 September 20:00 USD Federal Funds Rate <2.00%
26 September 20:30 USD FOMC Press Conference
27 September 11:30 ZAR PPI y/y 6.10%
27 September 14:30 USD Core Durable Goods Orders m/m 0.10%
27 September 14:30 USD Final GDP q/q 4.20%
28 September 08:00 ZAR M3 Money Supply y/y 6%
28 September 10:30 GBP Current Account -17.7B

Source: Economic Calendar, as of 21/09/2018

Commodities

Commodity prices have had a positive week with a softer dollar and slightly more optimistic market sentiment to aid near term gains.

Oil prices have continued to rise ahead of the upcoming OPEC meeting (Sunday 23 September). Brent crude is now testing the $80/barrel mark as speculation mounts that the oil cartel will be able to fill the gap in supply left by an embargoed Iran.

Platinum and palladium in particular have had an exceptional week, gaining significantly on Thursday, following reports of increased imports into Switzerland for August 2018. Switzerland is a major refining and vaulting destination for precious metals.

The Rand

The rand has seen a strong recovery in the week, gaining traction into the Reserve Bank’s MPC meeting on Thursday. Initial gains in the domestic currency followed emerging market momentum catalysed by tighter monetary policy in Turkey, Russia and Argentina. While there was some outside speculation that the SARB may follow suit and raise South African lending rates on Thursday, this was not to be, although a hawkish tone was set by the Reserve Bank Governor, seemingly enough to continue the short term strength in the rand.

Companies

Pick n Pay Stores Limited: released a 1H18 trading statement guiding that the company expects headline earnings per share to increase by between 75.0% and 85.0% from the prior year’s comparative period

Remgro Limited: FY18 results showed diluted earnings per share to have increased to 1,481.10c from 1,436.80c in the previous year

Astral Foods Ltd - Headline earnings per share for the 12 months ending September 2018 is expected to be at least 85% up on the previous year.

Pan African Resources - FY18 results showed headline earnings per share from continuing operations to have decreased to 18.71 cents per share from 38.72 cents per share in the previous year

Naspers: has said that it intends to separately list its Multichoice business in 1H2019

Sibanye Gold Limited: has guided that the South African Competition Commission has recommended that the South African Competition Tribunal approves the company’s proposed acquisition of Lonmin Plc, subject to certain conditions, which are agreeable to both Sibanye-Stillwater and the Commission

Rhodes Food Group Holdings Limited: an FY18 trading statement has guided that the company expects headline earnings per share to have declined by between 30.0% and 40.0% from the previous year

Corporate calendar

Date Event
26 September

Capitec Bank Holdings Interim results 1H19

Open an account now

It's free to open an account, takes less than five minutes, and there's no obligation to fund or trade.

IG provides an execution-only service. The material on this website does not contain (and should not be construed as containing) investment advice or an investment recommendation, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of the above information. Consequently any person acting on it does so entirely at his or her own risk. The research does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. This communication must not be reproduced or further distributed. The price levels provided are derived from ProRealtime Charts (IT-Finance)

Contact us

24 hours a day from 10am Saturday to Friday night at midnight.

010 344 0053

You can also email helpdesk.za@ig.com

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.