The Week Ahead

1 - 5 December 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

Q3 2014 Gross Domestic Product

Statistics South Africa guided that real gross domestic product (GDP) increased by 1.4% q/q, slightly below consensus estimates which predicted a 1.5% q/q figure.

The largest contributors to the q/q growth came from Finance, Real Estate, business services, wholesale, retail and motor trade as well as the catering and accommodation industry.

The agriculture, forestry and fishing industry showed material growth of 8.2%.

The Manufacturing industry reflected negative growth of 3.4% due to lower production in basic iron and steel, machinery, metal and non-ferrous metal, wood and wood products, paper, publishing and printing industries.

Of some concern in the report is the significant downward revision in the Q1 q/q figure to -1.6% from -0.6% the Q2 figure was also revised down albeit marginally, from 0.6% to 0.5%.

Nominal GDP for the third quarter is estimated at R963bn and the largest industries as measured by their nominal value were as follows.

Finance, real estate and business services at 20.3%. General government services at 17%. Wholesale, retail and motor trade; catering and accommodation at 14.4% andManufacturing at 13.4%.

Trade Balance & Credit Extensions

South Africa’s trade balance reflected a wider than expected deficit in October 2014 of R21.33bn. The consensus of estimates had predicted the deficit to be in the region of R6bn. Septembers trade deficit figure was revised to an improved R2.91bn.

Private sector credit extensions increased to 9.06% y/y in October from 8.74% in September. The total credit rose 10.46% y/y in October 2014.

International Data

Oil prices fell under significant pressure following news that the Organisation of Petroleum Exporting Countries (OPEC) had decided not to cut current production levels of the commodity. The reluctance to diminish supply comes at a time when the U.S. becomes more self-sufficient in oil on the back of increased fracking initiatives (conversion of shale gas to oil) which are creating further cost efficiencies for the world’s largest economy.

Preliminary GDP data out of the U.S. revised q/q growth for the third quarter to 3.9% providing further evidence of economic improvement within the region.

In the U.K. a second GDP estimate for the third quarter showed q/q growth of 0.7%.

Source: IG Insight, as of  28/11/2014

Top movers

Source: IG Insight, as of 28/11/2014

Top gainers

Steinhoff International has seen its share price met with investor favour as details relating to the acquisition of Pepkor Holdings were released in the public domain. The total purchase of PepKor is considered at R62.8bn which equates to an effective in 92% controlling interest in the company for Steinhoff. Thirty seven percent of the share holdings would be bought from Brait SE

Often in acquisitions; the purchaser’s share price will decline while the acquisition target would see the gain in share price. This was not to be as Steinhoffs share price surged more than 4% on the day, while Brait’s share price declined by around 15% on the day, highlighting the clear perception that Steinhoff looks may be acquiring the retail chain for a significant discount.  

Top Decliners

Sasol and BHP Billiton have fallen in sympathy with the oil price following news that the Organisation of Petroleum Exporting Countries (OPEC) had decided to keep the current level of production unchanged. OPEC’s decision appears an attempt to secure trade with the U.S., whose shale gas to oil conversions threatens to increase the country’s independence from oil imports. Recently we have seen Saudi Arabia (the largest OPEC and 2nd largest global oil producer) cutting export prices to the U.S. to maintain demand, further harbouring the aforementioned point.

The Bidvest Group has also seen a sharp decline from its recent all-time highs, following the release of a management update on general trading conditions. While international operations have witnessed a strong start to the new financial year for the company, trading conditions in South Africa have been cited as “weak”, as labour disruption and a pressured consumer have taken their toll.

 

Broker consensus

Brokers view on the markets.

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Educorner

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Broker consensus

Source: INET BFA, as of 28/11/2014

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.