The Week Ahead

27 - 31 July 2015

A look at local and international economic data, major events, economic releases and company news expected in the week to come.

By Shaun Murison,  Market Analyst

 

Shares overview

Top decliners

Commodity prices have been battered and bruised over the last week as strong U.S. data (and in turn dollar strength) and Chinese demand concerns weigh on sentiment. The extent of the rout in commodities has been evidenced in results and operational updates released from miners populating the decliners list.

Kumba Iron Ore has traded to new multi-year lows following its results release, compounding the negative influence of weaker underlying resource pricing over the course of the week. Normalised earnings (excluding one off items) fell by a massive 52% against the comparative interim reporting period in 2014. The huge drop in the iron ore index to an average price of $60/tonne (in the last six months) was the major contributor to the drop in earnings. Kumba is now targeting a production price of $45/tonne through cost saving initiatives to further improve operational efficiencies. The company has also decided not to pay a dividend with the aim of further preserving cash.

Anglo American Platinum had a much-improved first half of the year in which net sales revenue increased by 7% while headline earnings added a massive 1474% against the prior half-year comparative period. The improvement in earnings does however follow a low base of comparison in that the comparative period was negatively affected by prolonged industrial action.

Anglo American Plc's results highlighted a difficult interim period in which earnings per share dropped by 30% against the comparative 6 months in 2014. The 70c (US) EPS figure was however ahead of consensus. The 32c (US) per share interim dividend was maintained at the same level as the previous half-year.

The move to maintain the dividend is a little surprising as both subsidiaries Amplats and Kumba have announced that they would not be declaring a dividend in this interim period.

BHP Billiton released an operational review in which it was noted that group production increased by 9%. Production increases were noted in Petroleum (4%), Western Australia Iron Ore (13%), and Metallurgical Coal (13%), while copper production remained unchanged. 

Top gainers

Vodacom released a Q1 2016 trading update in which the following was noted:

  • Group revenue increased 7.0% (6.5%*) to R19 559 million with service revenue up 5.1% (4.7%*) to R15 660 million
  • Group data revenue accelerated 35.2% to R4 846 million, representing 30.9% of service revenue
  • Group active customers up 6.5% to 63.5 million and active data customers grew 10.8% to 28.0 million
  • South Africa service revenue grew 2.8% to R11 762 million driven by strong data revenue growth of 34.8%
  • International operations’ service revenue increased 12.9% (11.3%*) to R3 945 million; 25.2% of Group service revenue
  • Capital expenditure of R2 398 million was focused on LTE/4G rollout and expanding 3G coverage

Source: IG Insight, as of 24/07/2015

Date Company Event Amount
27-Jul Investec Ltd Ex-Dividend R2.16
28-Jul AECI Ltd Interim 2015 results n/a
29-Jul Barclays Africa Group Ltd Interim 2015 results n/a
31-Jul ArcelorMittal South Africa Ltd Interim 2015 results n/a

Source: Economic Calendar, as of 24/07/2015

INET BFA's weekly Broker Bonsensus on the top traded shares.

Click to view this week's broker consensus

Market overview

Local Data

Headline Consumer Price Index (CPI) data for South Africa showed inflation to be at 4.7% annualised in June 2015. Despite the figure remaining within the reserve banks targeted range (as it has for the past few months), the repo rate increased by 0.25% at this week’s Monetary Policy Committee (MPC) meeting.

Reserve Bank Governor, Mr Lesetja Kganyago, increased the repo rate to 6% citing upside inflationary risks as motivation thereof. Cost-push catalysts such as the Greek crisis, U.S. monetary tightening, commodity price weakness as well as Chinese equity market uncertainty were among the risks referred.

The GDP growth forecast was revised lower to 2% (from 2.1% at the last MPC meeting), while the current account deficit is expected to be around 4.6% of GDP for the year. 

International Data

In Europe, Greece parliament approved the EU conditions in lure of accessing bailout funds and remaining part of the euro. French and German manufacturing PMI data both fell short of consensus estimates, with the French data also alluding to minor industry contraction.

In the U.S., weekly jobless claims data was reported at a multi decade low with 255000 people filing for unemployment benefits (est. 279000). Crude oil inventory data showed that 2.5m commercial firms held more barrels of oil in the past week (est. -1.7m).

The week ahead

As global growth remains an essential market theme at present, markets will pay close attention to Preliminary GDP data out of the U.K. on Tuesday and Advance GDP data out of the U.S. on Thursday in the upcoming week. Also of increased significance (U.S.) will be the Federal Open Market Committee statement and rates announcement on Wednesday evening.

Date Time Region Event Estimation Previous
27-Jul 10:00 EUR German IFO business climate 107.6 107.4
27-Jul 14:30 USD Core durable goods orders m/m 0.40% 0.00%
28-Jul 10:30 GBP Prelim GDP q/q 0.70% 0.40%
28-Jul 16:00 USD Consumer confidence 100.1 101.4
29-Jul 20:00 USD FOMC statement - -
29-Jul 20:00 USD Federal funds rate <0.25% <0.25%
30-Jul 14:30 USD Advance GDP q/q 2.50% -0.20%
30-Jul 14:30 USD Unemployment claims 264K 255K
30-Jul 11:30 SA PPI m/m - 0.80%
30-Jul 11:30 SA PPI y/y - 3.60%

Source: Economic Calendar, as of 24/07/2015

 

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Last week's report

A reminder of the key company news announced last week.

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Broker consensus

Source: INET BFA, as of 24/07/2015

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