10 - 14 November 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
The rand has weakened sharply this week gaining traction in its depreciation following a credit ratings downgrade from the Moody’s Investor service. The ratings downgrade from Baa1/P-2 to Baa2/P-2 with the credit outlook moving from “stable” to “negative” now aligns itself with current ratings from the Standards & Poors and Fitch’s ratings agencies.
New vehicle sales in South Africa grew 4.9% in October 2014 (y/y) following an increase of 11.5% reported in September 2014.
Manufacturing PMI data was upbeat with a reading of 51.8 in October 2014, alluding to a marginal industry expansion and ahead of the previous months reading of 50.8. The figure was further supported by the HSBC PMI figure of 52.7 which was also a beat on expectation as well as the previous months figure.
The SACCU business confidence index alluded to a decline in business confidence as the index reading dropped from 89.2 in September 2014 to 88.8 in October.t.
In China services PMI data fell short of analyst expectations and the previous months reading of 54, coming in at 53.8. The services industry is now closely monitored by investors as it provides a contribution in the region of 44% (in 2013) to China’s GDP.
European and U.K. the monetary policy meetings yielded little in the way of surprises as the Bank of England and European Central bank kept benchmark lending rates unchanged whilst maintaining current asset purchasing facilities at current levels.
In the U.S. employment data, deemed as the most important economic data point in financial markets, was eagerly awaited by market participants. 214 000 jobs were added to the Non-Farming payroll while the Unemployment Rate improved to 5.8%. The figures were mixed against consensus estimates which predicted 231 000 to have been added with the unemployment rate expected to have remained at 5.9%.
In a reversal of fortunes, this week witnesses a resource dominated blue chip gainers list, while last week’s outperforming banking sector forms a majority on the blue chip decliners list. Locally listed mining stocks, despite facing continually depressed commodity prices, have started to rebound following renewed weakness in the rand which now moves back towards its worst level of the year (11.39).
This week’s share price losses within the banking sector are marginal in contrast to last week’s gains and perhaps can be attributed to short-term profit taking following the bullish run.
AngloGold Ashanti’s rebound this week follows the strong results (on a relative basis) reported. Headline earnings for the company returned to a profit of 11c per share in the quarter ending September 2014, from a loss of 22c per share in the June 2014 quarter and 5c (loss) per share in the September 2013 quarter. All in sustaining costs improved by 19% (y/y) while production gained 8% over the period.
Market participants would take note of the marginal improvement on the company’s net debt to adjusted EBITDA in September 2014 at 1.64 from 2.02 times in September 2013. The high levels of debt within the company have been of concern to investors and news that AngloGold Ashanti would be looking to the sale of and/or partnership agreements to strengthen the company’s balance sheet rather than the previously proposed share dilution has appeased investor sentiment.
MTN has found itself underperforming blue chip counters this week. The decline on MTN has fallen sympathy to economic concerns in oil rich Nigeria, as Africa’s largest economy, battles a significantly weaker domestic currency (the Naira) while the price of Brent crude continues to fall. Nigeria accounts for around 50% of MTN’s earnings and investors are questioning the near term expectation for growth and in turn profitability from operations within the region over the near-term.
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Source: INET BFA, as of 07/11/2014