The Week Ahead

24 - 28 November 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

In South Africa, new South African Reserve Bank (SARB) governor Lesetja Kganyago made his first public address which produced little in the way of surprises as lending rates were kept on hold while inflation (CPI 5.9%) remained within the target 3% - 6% range for a second month in a row. 

The recent inflation figures have benefitted from a declining oil price while the rand has remained fairly resilient. Inflation for 2014 is expected to average around 6.1% and moderate to 5.3% in 2015. The SARB’s forecast for gross domestic product growth for 2014 and 2015 has been revised lower to 1.4% (from 1.5%) and 2.5% respectively.

International Data

Asia provided many of this week’s catalysts for volatility. Third quarter Gross Domestic Product (GDP) data from Japan, released on Monday, showed a 0.4% economic contraction, following on from the previous quarters 1.8% contraction. Two consecutive negative quarters, from the world’s third largest economy (Asia’s second largest), suggesting a technical recession within the region. 

HSBC flash manufacturing PMI data out of China, considered a leading indication of economic health, showed a reading of 50, which sits on the cusp between industry expansion and contraction. The figure was worse than expected and the worst reading since May 2014. The People’s Bank of China (PBOC) did however come to the rescue of what was otherwise looking like a dismal week for equity markets in particular.

The PBOC surprised the market with a 25bps interest rate cut which ended the week on a positive note with the central bank’s first interest rate cut in around two years highlighting its commitment to continued growth within the region.  

European manufacturing and services data this week was poor with French PMI data of the aforementioned alluding to contraction within the both sectors, while the German data alluded to no growth in the industrial sector and marginal expansion in the services department. European Central Bank (ECB) President Mario Draghi in his address to the public guided that inflation remained a concern and if the outlook declined further the ECB would look to broaden debt purchases to support the economy further.

Source: IG Insight, as of  21/11/2014

Top movers

Source: IG Insight, as of 21/11/2014

Top gainers

This week’s top movers, witness the return of gold and platinum counters to the forefront of the gainers after many weeks of depressed price activity. The gains leverage themselves off a relatively low base, but find reprieve in a weaker dollar equating to higher pricing of commodity prices.

News that the Peoples Bank of China had lowered its benchmark lending rate by 25 basis points has renewed optimism for resource demand as the central bank shows its commitment to stimulating growth in the second largest economy in the world.

The Vodacom Group has also rebounded sharply from the lows realised in recent weeks after a poor investor reception its company’s results. Vodacom is however on the eve of a rather healthy dividend pay-out (R3.75) providing reason for this week’s rebound.

After a relatively weak interim period, Tiger Brands has shown a much stronger second half to the year, resulting in an 11% increase in full-year profit. The company has cited significant progress in addressing challenges in its Nigerian operations reducing the net loss from the region by around 27%.

Top decliners

The extents of declines this week are marginal in comparison to the extent of gains this week with the late week market euphoria masking the weakness that ensued for most of the trading week.

Naspers which heads up the list finds itself retracing from new all-time highs realised just last week fuelling the assumption that the decline may be a function of profit taking.

Shares Life Healthcare and Assore find themselves relative underperformers in the current market euphoria as the previous weeks earnings guidance released by both companies continue to weigh on investor sentiment.

Broker consensus

Brokers view on the markets.

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Broker consensus

Source: INET BFA, as of 21/11/2014