The Week Ahead

18 July 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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Market overview

Local Data

This week’s Monetary Policy Committee meeting witnessed the repo rate raised by 25 basis points (0.25%). The marginal increase defers from the 50 basis movements we have come to expect in the past and highlights the difficult economic environment faced in terms of high inflation and negative growth.

The reserve bank has revised the outlook lower for 2014 GDP growth to 1.7%, with hopes of a timely resolve for the manufacturing sector strike, which will otherwise further hamper economic growth. The inflation outlook for this year has been revised marginally higher from 6.2% to 6.3%.

Stats SA reported that in May 2014, Wholesale trade sales and Motor trade sales decreased by 0.9% and 1.1% respectively year-on-year. Retail trade sales data was a little more upbeat increasing 2.4% over the same period.

The three week long Numsa led strike continues after wage negotiations were reported to have failed. Employers represented by SEIFSA offered employees an increase of 10% this year, 9.5% in 2015 and 9% in 2016. The offer was rejected by the union who insisted on 10% each year over the three year period. The offer has since been retracted by employers and Numsa has now offered to relax their demands into a two year wage deal of 10% each year.

International Data

News that the U.S. will be taking a harder stance against Russia, by increasing sanctions (for their support of rebel forces in the Ukraine) has initiated global market weakness. The U.S imposed sanctions, now target major banks, energy companies and the Russian defense industry. European Union leaders have also released a list of measures intended to reduce investment in Russia while grooming the market for further action.

A Malaysian airlines passenger jet has been reportedly shot down near a Russia/Ukraine border. The tragic event which witnesses nearly three hundred lives lost exacerbates the Russian situation as pro-Russia rebel militants have been accused by the Ukrainian government. Rebels have denied their involvement and the matter is to be investigated.

In China, GDP for the second quarter showed year-on-year growth of 7.5%, ahead of consensus estimates which predicted growth of 7.4%. In the UK, the unemployment rate was reported as unchanged at 6.5%, while 36 300 less people claimed unemployment benefits last month.

In the US, Fed Chairperson Janet Yellen delivered a testimony before the senate Banking Committee. In the testimony, it was indicated that if the current economic and labour recovery continued, the timeline of rising interest rates could be brought forward.

Source: IG Insight, as of  18/07/2014

Top movers

Source: IG Insight, as of 18/07/2014

This week, the top decliners list finds itself dominated by non-diversified resource counters. A production report released by Anglo American Platinum (Amplats) highlights the impact on mining operations in Rustenburg following the longest strike in South African history. Amplats’ total refined platinum production declined by 40% in the second quarter as a result of both the protracted strike this year as well as the consolidation and restructuring which took place in 2013. Investor sentiment finds itself dampened within the platinum sector on the update. In turn, we have witnessed Impala Platinum falling in sector sympathy and anticipation of its hampered production not yet reported.

Ironically, Anglo American Plc of which Amplats is a subsidiary heads up the top gainers list. Despite platinum production losses for the diversified miner, guidance released through the Stock Exchange News Service (SENS) advised that metallurgical coal, iron ore, copper, nickel and diamond production had all increased. Iron ore and diamonds provide a significant contribution to the company’s revenue with a greater profitability than platinum at current commodity prices.

Woolworths received approval from an Australian court on the takeover of retailer David Jones Ltd. The company also released a trading update for the 52 weeks ending 29 June 2014. Total group sales increased by 14.4% compared to the 2013 comparative. Clothing sales in South Africa have increased by 10.6%, while food sales grew by 14.8%. Australian and New Zealand sales (including the Witchery Group) showed strong growth of 20.3%. The Woolworths financial services debtor’s book showed year-on-year growth of 10.8%, with an impairment rate (including collection costs) of 4.8%.

SABMiller announced the successful sale of its Tsogo Sun ordinary shares for a total gross consideration of R7.6bn.  

Earnings focus

This week we witnessed tech giant Google release their Q2 earnings results. The results were mixed relative to expectations. View a summary of Google’s results here

Apple is scheduled to release their earnings results on Tuesday 22 July. Read IG’s insights on Apple here and take advantage of our extended trading hours.

Source: Bloomberg


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24 July 2014

18.30 Pretoria Country Club, Pretoria 1.5hrs

13 August 2014

18.30 Premier Hotel Regent, East London 1.5hrs

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Broker consensus

Source: I-Net Bridge, as of 18/07/2014

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