5-12 September 2014
Our regular look at the news making the headlines, using our market insight information and analysis tools - now with online videos and tutorials.
By Shaun Murison, Market Analyst
A busy trading week has been catalysed predominantly by geo-political and economic events outside of South Africa, while local data releases were relatively light in comparison.
Manufacturing PMI data alluded to an improving manufacturing sector with an index reading of 49 suggesting a slower contraction than in the previous month (47.8). New vehicle sales were reported to have declined a further 1.4% in August, after declining 1.5% in July 2014.
The business confidence index rose to an index reading of 89 in August suggesting an improving business sentiment locally.
In China, Manufacturing and Services PMI data alluded to minor industry expansion in line with expectation.
In the UK, there were no major surprises as the Bank of England (BoE) kept rates, as well as the current asset purchase program, unchanged. Manufacturing PMI data out of the region suggested a slower rate of expansion in the manufacturing sector than consensus estimates had predicted as well as that of the preceding month. Services and Construction PMI data was upbeat improving on the previous months reading and alluding to healthy industry expansion.
In Europe, German factory orders broke the recent run of poor economic data showing month-on-month growth of 4.6%, well ahead of consensus estimates. The European Central Bank (ECB) indicated its commitment to an economy (which of late has appeared to be waning), with a new round of stimulus being announced as well as a further easing on lending rates.
Relief that Russian and Ukrainian leaders have been discussing a ceasefire within the Eastern Ukraine region has improved sentiment in markets. The most noticeable reaction has perhaps been that of dollar denominated gold which declined significantly on the news.
In the US, trade balance as well as Manufacturing and Services PMI data was more or less in line with consensus estimates although largely inconsequential relative to the anticipation of Non-Farm employment data on Friday. 142 000 new jobs were added to the Non-Farm payroll, a significant miss on consensus estimates which predicted 230 000 jobs to have been added. The Unemployment rate was in line with expectation at 6.1%, although the participation rate of working age job seekers equalled the lowest level in decades at 62.9%.
This week’s trading activity once again witnesses a resource dominant decliners list although a rare cameo appearance by vertically integrated retailer Steinhoff International has entered the blue chip poor performing ranks.
MTN entered the gainers list after news broke that the company will be sell more than 9000 towers in Nigeria, in a joint venture with IHS, a specialist tower company, which now has access to more than 20 000 towers within Africa. The value of the deal has not been fully disclosed although speculation is that it would be in the vicinity of around $1.8bn. Nigeria is MTN’s cash cow attributing to nearly 50% of the group’s earnings before interest, tax, depreciation and amortisation (EBITDA). The move should provide a cash injection, help improve operating costs while providing increased capacity in the high populous Nigerian market.
RMB Holding’s released a positive trading update for the year in which headline earnings per share (HEPS), over the period, is expected to have increased by between 20% and 26%. Firstrand, of which RMB is a division, expects its full year HEPS to have increased by a similar margin further adding positive sentiment to the sector, with the earnings guidance alluding to an outperformance against fellow banking peers this reporting season.
Resource counters continue to battle commodity prices which decline as the US dollar strengthens, with the currency finding preference against its frontier market peers against the backdrop of monetary tightening policies in Europe, the UK and the US. The ceasefire discussed between Ukranian and Russian presidents in the week has seen a further decline in commodity prices, with spot gold in particular struggling, giving up more than $20/ounce in the trading week. The result has not bode well for local miners which underperform what has been a positive week for local equities in general.
Steinhoff has had a torrid week following the release of earnings guidance ahead of the company’s full year results expected on Tuesday the 9th of September 2014. Headline earnings per share are expected to have increased by 10% to 15% which is short of consensus estimates for the company’s growth. Steinhoff derives the bulk of its earnings from Europe through its purchase of a leading retailer within the region, Conforama, which has served well as a currency hedge in the past.
However, investors may question the future currency benefit, as the Euro continues to weaken while the ECB further stimulates the European economy and South Africa remains in the fledgling stage of rate tightening cycle keeping the rand resilient at this point.
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17 Septemebr 2014
|18.30||Protea Hotel, Stellenbosch||1.5hrs|
|18 September 2014||18:30||The Westin, Cape Town||1.5hrs|
|29 October 2014||18:30||IG Offices, Johannesburg||1.5hrs|
|30 October 2014||18:30||Pretoria Country Club, Pretoria||1.5hrs|
|19 November 2014||18:30||Southern Sun Elangeni & Maharani, Durban||1.5hrs|
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Source: INET BFA, as of 04/09/2014