The Week Ahead

22 - 26 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

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Economic catalysts

Market overview

Local Data

The South African Reserve Bank (SARB) left benchmark lending rates unchanged at this quarter’s Monetary Policy Committee (MPC) meeting. The decision to keep the repo rate at 5.75% followed a vote in which a majority of policy makers were in favour of the decision, while one member had voted to further tighten monetary policy.

The expectation for GDP growth in 2014 was once again downgraded by the SARB to 1.5% from 1.7%, although more material growth is expected in 2015 (2.8%) and 2016 (3.1%).

Consumer Price Index (CPI) data showed inflation in August to be higher than expected at 6.4% largely attributable to higher food prices. The Reserve Bank’s forecast of average headline inflation in 2014 is at 6.2% with the possibility of currency depreciation remaining an upside risk to the outlook. Reserve Bank Governor Gill Marcus announced that she would not be available for another term of service after her five year contract expires in November this year.

Strong contributions from general dealers as well as retailers in textiles, clothing footwear and leather goods witnessed a better than expected retail trade sales figure for July 2014 which showed growth of 2.4% year-on-year. Motor trade sales were also upbeat with year-on-year growth of 3.3% in July 2014, with the highest annual growth rate being recorded for fuel sales, convenience store sales and workshop income.

International Data

Global markets expressed caution ahead of the UK referendum for Scottish independence, only to find relief from uncertainty as a vote of “No” see’s Scotland remain a part of the United Kingdom. Also in the UK, the unemployment rate declined to 6.2% as 37,200 less people claimed unemployment in August 2014. At the Bank of England’s policy meeting rates were left unchanged as was the current asset purchase facility.

In the U.S., markets awaited the Federal Open Market Committee (FOMC) meeting in which Fed Chairperson Janet Yellen addressed the public. The bond purchasing program was reduced by a further $10 billion with the program looking set to end in October this year. No new guidance on when interest rates would start to increase was given to markets although it was reiterated that the tightening of monetary policy would remain data dependant and accommodative for a “considerable time”.

Source: IG Insight, as of  19/09/2014

Top movers

Source: IG Insight, as of 19/09/2014

Markets have for the most part erred on the side of caution ahead of a busy economic calendar in the week gone by. However, as the week drew to a close we have seen caution abated, as relief has followed favourable outcomes to local rates data, international referendums, IPO’s and a no surprise Federal Reserve meeting outcome.

SABMiller has outperformed the market this week, but in truth most of the week’s gains were attributable to a single days’ trading activity.  Heineken’s rejection of SABMiller’s proposed takeover bid, fuelled speculation that SABMiller could once again become an acquisition target of the world’s largest brewery Annheuser-Busch Inbev. The speculation gained further traction as newswires suggested that Annheuser-Busch was already seeking finance on the deal which was confirmed as untrue, following an interview with a company representative.

Standard Bank has rebounded from the general lag this year, against its fellow major banking counterparts, after an investment upgrade from Morgan Stanley. The upgrade further compliments Standard Bank as sector peers Firstrand and Barclays Africa Group were both downgraded by Morgan Stanley to neutral from overweight.

Weekend data, which witnessed soft year-on-year industrial production figures out of China, has added to concerns over a slowing Chinese economy, demand concerns which in turn affect local resource counters. Further pressure has been added to commodity prices, as the dollar remains the preferred developed market currency, strengthening as the U.S. Federal Reserve Bank confirms the end of its asset purchasing program at this week’s Federal Open Market Committee (FOMC) meeting.

Richemont’s share price has reacted in an aggressively negative “fashion”, following the release of a disappointing sales update for the five months ending August 2014. The company which carries investment appeal through its global presence and aspirational product offering has performed worst, over the reported period, in the regions which have been earmarked for growth.

Asia-Pacific and Japanese sales both showed contraction which was exacerbated by negative currency fluctuations. European growth was slow, while U.S. and Middle Eastern sales were more encouraging with the net being that group sales increased by only 1%. The company did however also adjust for its dividend offering of R1.63 per share.

Broker consensus

Brokers view on the markets.

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Educorner

Gap analysis continued

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.

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When and where

Date

Time

Location

Duration

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 19/09/2014

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