Markets remain robust as volatility declines

Markets remain robust as volatility declines

Global markets remain robust with no clear signs of a downturn as volatility slowly declines. Investors are buying even the smallest dip, which has seen the market remain in a bullish phase this past week. 

 

On the currency front, we could see gradual Rand weakness as over the coming months due to the global interest rates rising. A Federal Reserve member stated interest rates might have to go higher than the 3% target to contain inflation in the future and an ECB policy maker indicated there will be an update on the timing of the end of the EU’s monetary stimulus programme. 

 

The week ahead: 

  • Local economic data releases: Quarterly Labour data (15/05); Retail Trade sales (16/05); Wholesale and Motor Trade sales, Private sector building statistics (17/05) 
  • Results Due: CGR, LON, MZR (15/05); CTA, GPA, SNV, THA, TCP (16/05); CAC, DTC, INL, INP, INLP, IPF, OCE, SEA, SKK (17/05); ANA, CFR (18/05) 
  • LDT (15/05): EFG, MDI, OCT, PSG 

Last week’s movers and shakers… 

Best Performers: SNV 10.9%; CMH 6.2%; NPN 6%; NED 5.3%; EXX 5.3% 

Worst Performers: SGL -17.8%; SNH -16.2%; DTC -16%; IMP -14.5%; BAT -11.8% 

 

Other Economic data releases of interest… 

  • Tuesday: Inflation Report, Average Earnings Index (UK); Retail Sales (USA) 
  • Wednesday: ECB President Draghi Speaks (EU); Crude Oil Inventories (USA); SNB Chairman Jordan Speaks (CHF); Unemployment Rate (AUS); Annual Budget Release (NZL) 
  • Thursday: BOE Inflation Report, Official Bank Rate, Monetary Policy Summary (UK); CPI (USA) 
  • Friday: CPI (CAN) 

 

New Buy 

African Rainbow Minerals – in a sweet spot 

 

ARM was not spared from the sharp sell-off in mining related stocks during February and March.  However, a closer look at this company is justified; it has a June year-end and in the first half to December delivered strong results, EPS up 15%; Ferrous metals were the largest contributor to earnings, and although an anticipate correction in Iron Ore prices did materialize, Manganese prices remain firm. Nevertheless, Iron Ore prices have recovered and average prices for the second half should be higher that first half.  

 

Cost containment has been good across most of their operations, and we expect more good news with the next results announcement.  

 

The forward PE is approximately 7.1 and forward dividend yield of 4.5%. ARM typically provides a trading statement in mid-August with results out in September.  

 

We are buyers of ARM (JSE share code is: ARI) at current levels of R 110 per share.  

  • Short term traders can buy ahead of the trading results announcement.  
  • Longer term investors can hold while Ferrous Metal prices remain supportive. 

 

Short term Ideas 

  • Netcare: Cancel Order, entry not achieved. 
  • Mediclinic: Trade closed for 11.7% gain in less than a month. 

 

Long Term Ideas 

  • Dischem: Buy dips below R30.50 for a move above R37.00 
  • Shoprite: Building support above R240.00.  Buy below R245.00. Target of R285. 
  • Anglo: 8% open gain, next resistance level at R350. 
  • Sasol: A break above R460 targets R490. Move stop loss to R440 for a 10% gain. 
  • Aspen: Accumulate on weakness below R260. 
  • Sygnia: Add below R12.50. 
  • Santova: Buy below R3.00.  
  • Merafe: Accumulate below R1.55. 
  • Jubilee: A new deal in Zambia, will see buyers come in. Speculative buy below R0.50.  
  • MTN: Held up well after US pulled out of Iran deal. Bullish results, looking for a break above R 135,00. 
  • Glencore: Another dividend received. Hold 
  • Wescoal: Long term buy. Add below R1.80 
  • Naspers: Increase exposure below R3,000.  

 

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