The Week Ahead 28 March

28 March 2014

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

By Shaun Murison, IG Market Analyst

View market data

Company announcements

Dividends

Economic catalysts

Market overview

Local Data

At the Monetary Policy Committee (MPC) meeting on Thursday, benchmark interest rates were left unchanged by the South African Reserve Bank. The decision was as forecasted by the majority of economists, however it was alluded that interest rates could increase this year as the volatile rand holds inflation to ransom. 

Reserve Bank governor Gill Marcus revised economic growth forecasts for 2014 and 2015 lower to 2.6% and 3.1% respectively, while keeping the core inflation estimate unchanged at 6.3% for this year.

The Producer Price Index (PPI) reading came in worse than consensus estimates had predicted, showing inflation at a production level increased to an annualized 7.7% in February 2014.

International Data

In China, HSBC Flash Manufacturing PMI data fell short of expectation and alluded to further (although minor) contraction in the region. The news furthers expectation that the Chinese Central Bank may be on the verge of implementing further stimulus measures to help bolster growth within the economy.

In Europe, Flash Manufacturing data showed surprise industry expansion out of France, while Germany’s reading also indicated expansion although a slight miss on consensus forecasts.

In the US, economic data continued to show mixed readings. Consumer Confidence was at a multi-year high and weekly unemployment claims were less than expected, while both Pending Home Sales and Existing Home Sales fell short of expectation.

Source: IG Insight, as of  28/03/2014 14:23

Top movers

Source: IG Insight, as of 28/03/2014 14:40

Gold miners continue to underperform this week as the spot price of gold falls below the $1300/oz mark, and the rand remains resilient at current levels. Gold has extended its decline from last week, after Fed Chairperson Janet Yellen announced a further reduction of monthly asset purchases in the US and tensions in Russia find less media attention.

Retail And financial counters find themselves dominating the top gainers list this week. 

Standard Bank is outperforming its major banking peers as investors continue to react positively to news that (upon regulatory approval) it is looking to conclude a deal to sell its listed Brazilian subsidiary.

The deal would see a significant inflow of cash from the sale of its South American asset leaving market participants speculating over a possible special dividend. The banking sector as a whole has seem investor enthusiasm as it appears to offer relative value on overall market that trades at historically high price to earnings valuations.

Truworths is continuing it’s much needed rebound from multi year lows finding favour in interest rates remaining unchanged and a slightly firmer rand.

Broker consensus

Brokers view on the markets.

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Broker consensus

Source: I-Net Bridge