The Week Ahead

8 August 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

 

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Company announcements

Dividends

Economic catalysts

Market overview

Local Data

Our local equity market has come under pressure in the week gone by as a risk off scenario has been largely catalysed by geo political events in Europe and the Middle East.

The local economic schedule has been relatively light, with manufacturing production and sales data from Statistics South Africa (STATSSA) perhaps being the most relevant. Manufacturing production increased by half a percent in June 2014 from the June 2013 comparative. The figure was hampered by an 11.3% contraction in output from motor vehicles, parts and accessories. Petroleum, chemical, rubber and plastic products increased 3.9% contributing 0.9% to the overall figure.

The business confidence index in South Africa fell to 87.9 in July 2014 from a reading of 89.7 in the preceding month.

Gross gold and forex reserves rose to $49.89 billion ($48.65 billion previous) while net gold and forex reserves declined to $44.32 billion in July ($44.83 billion previous).

International Data

Russian armed forces increasing their presence at Ukrainian borders has provided an initial catalyst to the global market weakness witnessed this week, with tensions and sanctions both mounting towards Russia. An Iraqi plea to the U.S. for military assistance has been addressed by President Barack Obama who has authorised a military airstrike within the region further unnerving markets.

In the U.S, ISM non-manufacturing PMI data alluded to better than expected industry expansion while month-on-month factory orders data showed the total value of new orders placed with manufacturers to have increased by 1.1%. The trade deficit unexpectedly narrowed to $44.5 billion from $44.7 billion in the previous month.

In the UK, construction and services PMI data was a beat on consensus alluding to industry expansion while manufacturing production data month-on-month alluded to slowing growth of 0.3%. The current asset purchasing facility and lending rates remained unchanged.

In Europe, the ECB left lending rates unchanged as we await the impact of the previous rate cuts to filter into markets.

In China, non-manufacturing PMI data declined from the preceding month to an index reading of 54.2 from 55 previously. Trade balance data showed a larger than expected surplus of $47.3 billion.

Source: IG Insight, as of  8/08/2014

Top movers

Source: IG Insight, as of 8/08/2014

The MTN Group heads up the top gainers list following a positive reaction to the group’s interim results. Revenue growth in South African operations declined by 7% as mobile termination rates and pricing competition took its toll, however strong revenue growth of 21% was realised from Nigerian operations, more than offsetting the local earnings setback. The headline earnings per share for MTN grew 9% from the comparative interim period and investors were particularly motivated by the more than 20% increase in the interim dividend offering.

Anglogold Ashanti’s share price gain follows a rebound in dollar denominated gold as well as a weakening rand. Tensions in Iraq, the Gazza strip as well as Russia/Ukraine have catalysed risk aversion which witnesses safe haven buying of the precious yellow metal.

Assore released a trading statement in which the company expects headline earnings to increase to between R4 billion and R4.5 billion from R3.5 billion recorded in the previous financial year. Declines in commodity prices (iron ore in particular) were more than offset by a favourable USD/ZAR exchange rate.

Not on our list, as it falls outside of the blue chip category of shares, is African Bank Limited. The company witnessed excessive selling in its shares after releasing a business update in which the company expects a full year loss in excess of R6.4 billion. The loss continues the woes realised last year before the company recapitalised through a rights issue. Ellerines the company’s furniture retail holding, has now been placed on business rescue. The African Bank share price faced declines in excess of 50% for two consecutive days, reducing the company’s value in terms of market cap to well below R1 billion from more than R9 bollion earlier on in the week.

Earnings focus

MTN released their interim results on Thursday, which were a welcome surprise in terms of healthy dividend increase. Total group revenue was boosted by international operations, increasing by 10.7%. Read the full article.

Standard Bank is set to release their interim results on the 7th of August. As its share price lags behind the competition, will the latest figures provide further evidence that Standard is deviating off course?

 

 

Broker consensus

Brokers view on the markets.

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Trendlines

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Future seminars

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When and where

Date

Time

Location

Duration

13 August 2014

18.30 Premier Hotel Regent, East London 1.5hrs

14 August 2014

18.30 Radisson Blu, Port Elizabeth 1.5hrs

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Broker consensus

Source: INET BFA, as of 8/08/2014