The Week Ahead

16 May 2014

Our regular look at the news making the headlines, using our market insight information and analysis tools.

By Shaun Murison,  IG Market Analyst

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Company announcements


Economic catalysts

Market overview

Local Data

The All-Share index managed to reach all-time highs this week, although the economic data to support was left much to be desired.  

A report by Statistics South Africa showed that mining production fell 4.7% in March 2014, while the previous months reading was revised lower to 4.5% on an annualised basis. Platinum Group Metals (PGMs) was an obvious and significant negative contributor, with production decreasing by 44.3% year on year as the strike in the platinum belt continues to take its toll.

Local retailers surprisingly outperformed this week, despite retail sales figures reported showing a lacklustre 1% growth annualised. Motor trade sales figures were healthier as measured in nominal terms, increasing by 2.9% year on year. Used vehicles showed a 7.5% annual growth rate, while accessory sales grew 5.7%.

Business confidence in South Africa decreased marginally from the previous month (92.70) to 92.6 in April 2014.

International Data

In the US, core retail sales showed no growth on a m/m basis and retail sales added a marginal 0.1% from the previous month, while earnings from retail heavyweight such as Walmart disappointed markets.

Inflation as measured at a factory (PPI) and a retail (CPI) level was slightly higher than markets had expected coming in at 0.6% and 0.2% respectively. Weekly unemployment claims indicated that 24 000 less people filed for first time unemployment insurance last week than the previous week. The Philly Fed Manufacturing Index reading was also better than expected indicating improvement in Philedelphia’s manufacturing sector.

In Europe, flash GDP growth q/q was reported to be 0.2%. The figure was half of what consensus forecasts had predicted and in line with the previous q/q growth figure. Preliminary GDP figures from Eurozone regions indicated a quarterly contraction in Italy (-0.1%), no growth in France (0.0%) and Germany outperforming the region once again with 0.8% growth.

In China, the non-performing loans report showed its biggest quarterly increase in almost nine years, fuelling further concerns over the region’s slowing growth. Industrial production figures showed 8.7% growth y/y, while fixed asset investment showed a 17.3% improvement on the previous year.

Source: IG Insight, as of  16/05/2014

Top movers

Source: IG Insight, as of 16/05/2014

It has been a positive week on our local exchange where gains have been led by retail and industrial counters.

Naspers has found renewed strength after its Chinese counterpart, Tencent Holdings, released a strong set of results. Tencent (of which Naspers has more than a 30% holding) showed a substantial beat on analysts’ expectations of what their earnings would be. The price of Naspers rallied more than 10% on Wednesday, a move that was perhaps exaggerated by short covering in the stock.

Woolworths has provided the market with more information on its proposed buyout of Australian retailer David Jones. The more than R20bn deal, if approved would be financed through; R10bn in cash, around R4bn in the form of a bridge loan and the balance of the purchase consideration will be funded through an Equity Bridge Facility.  

Tiger Brands has announced that it plans to write off the full carrying value of the goodwill and intangible assets relating to its investment in Dangote Flour Mills. The impairment equates to a significant drop in the company’s earnings per share, however it would appear that investors are not deterred by the news as the share price has seen substantial gains this week.

Nedbank released results for the first quarter of 2014 on Tuesday. Net interest income showed growth of 8.7%, while non-interest revenue showed a muted 2.7% improvement.

Broker consensus

Brokers view on the markets.

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Spotlight on equities

An analysis of upcoming company announcements, using our market insight information and analysis tools:

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Source: I-Net Bridge, as of 16/05/2014

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