The Week Ahead

15 - 19 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

 

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Company announcements

Dividends

Economic catalysts

Market overview

Local Data

This weak dollar strength has hampered the recent progress of a strengthening rand which witnessed further losses following poor economic data.

The current account deficit widened further than expected to R222 billion in the second quarter of 2014, amounting to 6.2% of South Africa’s Gross Domestic Product (GDP). The figure has worsened from a deficit of R161 billion in the first quarter of 2014 which equated to a deficit of 4.5% of GDP.

Mining production and sales figures for July 2014 (year-on-year) showed a larger than expected contraction of 7.7%. Platinum Group Metals (PGMs) posted the largest negative growth rate of -45.2% and providing the largest negative contribution to the overall production figure. The poor contribution from PGMs was unexpected in light of the fact that labour issues had been resolved by this stage. Copper, gold and diamonds also witnessed contraction over the period with declines of 15.9%, 14.6% and 10% respectively.

Manufacturing production decreased by 7.9% in July 2014 (year-on-year) led by lower production in basic iron and steel provisions. The contraction was slightly worse than consensus estimates had predicted but not completely unexpected due to the strike in the manufacturing sector over the period.

International Data

In China, trade balance data at the beginning of the week showed a larger than expected surplus of $49.8 billion, while CPI data showed year-on-year inflation to have increased by 2%.

In the US, weekly unemployment claims were slightly worse than expected with 315 000 first time claims over the period. Core retail and retail sales increased by 0.3% and 0.6% respectively month-on-month.

In the UK, manufacturing production data showed a 0.3% increase in line with expectation. Unease over whether or not Scotland will vote for independence at next week’s referendum has caused market jitters within the region. The referendum will take place on the 18th of September 2014.

Source: IG Insight, as of  12/09/2014

Top movers

Source: IG Insight, as of 12/09/2014

A brief glance at the top movers list highlights a bearish bias to trading activity as the extent of losses far exceed the extent of gains realised this week.

In a reversal of fortunes, the only retailer to make our top decliners list last week finds itself heading up the gainers list this week. Salient features of the full-year results show revenue to have increased by 20% while adjusted Headline Earnings Per Share (HEPS) grew around 27% and cash generated from operations increased by 68%. It should be noted however that revenue gains were attributable to a depreciating rand against the euro rather than real sales growth.

Aspen Pharmacare’s robust full-year earnings catalysed trading in its share price to new high territory once again. Normalised HEPS increased 27% over the period while revenue surged 53% from the previous year’s comparative. The company further validates its rand hedging qualities with 78% of operating profit now being derived outside of South Africa. While domestic growth is expected to remain sluggish group CEO Steven Saad has alluded to further growth through acquisition moving forward looking to fellow emerging markets such as Latin America, Russia and Eastern Europe.

AngloGold Ashanti’s reacted to news that it would be looking to restructure and recapitalise the business.  The company has announced that it has local regulatory approval to unbundle its international operations from local operations, but remains subject to shareholder approval.  The unbundled international operation currently titled “NewCo”, will find a primary listing on the London Stock Exchange with an inward listing on the JSE, with Anglogold retaining a 65% interest thereof. 

The $2.1 billion rights offer is perhaps where market participants are more aggrieved. Billionaire hedge fund manager John Paulson whose holding (through managed fund) in AngloGold Ashanti equates to around 6.5% of the company, has expressed concern surrounding the “massive diluted equity offering” and intends to vote against the deal. 

Broker consensus

Brokers view on the markets.

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Educorner

Gap analysis

Gap analysis is an area on a bar or candle chart where no trading has taken place. Depending on where the price gap is located in a trend, gaps are generally grouped into one of three categories: breakaways, measuring/runaway and exhaustion.

Watch the video to learn more about gap analysis and the various categories.

Future seminars

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When and where

Date

Time

Location

Duration

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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Broker consensus

Source: INET BFA, as of 12/09/2014