The Week Ahead

30 May 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

This week economic data has not underpinned an index trading at all-time highs.

The ongoing platinum strike has taken its toll on local economic activity, as Gross Domestic Product (GDP) for the first quarter decreased by 0.6%. The mining and quarry industry was the biggest negative contributor, followed by the manufacturing industry.

Negative growth over the quarter was not unexpected; however the figure was far worse than anticipated. Annualised figures for Last week’s CPI and this week’s PPI are at 6.1% and 8.8% respectively, showing inflationary pressures emerging while economic growth is negative.

This should leave the Reserve Bank hard placed for too hawkish a stance at future policy meetings, and perhaps rates could remain at current levels for an extended period of time. 

International Data

In the US, m/m pending home sales and Core Durable Goods data fell well short of consensus forecasts while jobless claims showed less people than expected claimed unemployment benefits last week.

The most significant data point was the q/q preliminary GDP print which showed annualised growth to be negative at -1%, the figure can be partially attributed to poor weather conditions.

US markets finished stronger despite the news, as investor optimism increased in lure of accommodative benchmark lending rates perceived to have been granted a lengthened time horizon. 

Source: IG Insight, as of  30/05/2014

Top movers

Source: IG Insight, as of 30/05/2014

Shares with significant iron ore exposure have continued to underperform this week, as the dollar denominated price of the primarily Chinese consumed steel ingredient remains under pressure. The weakness has now extended further into the resource sector. 

The price of spot gold decreased by more than $30/oz after Russia was reported to have recalled the majority of troops from its Ukraine border, reducing safe haven demand for the precious metal, affecting local miners. The ongoing strike in the platinum sector is now reported to be pressuring the remaining stockpiles of the three major platinum producers, and in turn hampering their respective share prices. Talks to resolve the wage dispute continue to find little in the way of progress.

Anglo American Plc finds itself a victim in this week’s resource weakness as the sum of its parts, namely, Kumba, Anglogold and Amplats have been negatively affected by all of the aforementioned.

A diverse group of industrial counters head up this week’s top gainers list. While the rand has weakened against major international currency peers, most significantly after this week’s poor GDP print, the top five blue chip performers share (some more than others) rand hedging attributes.

Although not on our top performing list, investors were encouraged by the Foschini Group's results which witnessed strong share price gains in the latter part of the week. The company reported only 6% growth in HEPS over the reporting period, but investors are motivated by the group’s cash sales growth outperforming credit sales growth. Retail cash sales now amount to around 42% percent of the group’s turnover. The sale of its RCS division for R1.4bn witnesses the company further divesting from credit operations in a pressured consumer environment and it has been suggested that the funds may be utilized in a share buyback program.

Broker consensus

Brokers view on the markets.

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Broker consensus

Source: I-Net Bridge, as of 30/05/2014

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