The Rand has bucked the emerging market currency trend by strengthening 7.6% year to date. The Brazilian Real, Indian Ruppee and Turkish Lira have all weakened over 7%. The Turkish Central bank surprised the market with it’s 3% interest rate hike last week.
We should see an increase in market and currency volatility leading into Friday’s US employment data, which is expected to stay near the 18-year low hit in April. The market will be eyeing the average hourly earnings as a gauge for an uptick in US inflation. The Fed is expected to raise rates at its next meeting (mid-June), but committee members are cautious on raising rates quickly due to other regions still maintaining accommodative policies.
Any sell-off will be short lived and we expect markets to rebound to their previous highs by year-end.
The week ahead:
- Local economic data releases: SA Trade Balance, PPI (31/05)
- Results Due: ACS, ANA, DLT, WIL (29/05); FGL, HUG, NPK, SPP, TAW, VKE (30/05); ADW, APH, CRG, CKS, EEL, GTR, HUL, ILE, ISB, EPP, PSV, REN, SDC, SPA, TAS, (31/05); CSG, LHC, MRP (01/06)
- LDT (29/05): EQU, GRP, ILU, L4L, MIX, RBX, YYLBEE
Last week’s movers and shakers…
Best Performers: DRD 7.9%; MUR 7.4%; SNV 5.6%; BAT 5.6%; MRP 4.8%
Worst Performers: SNH -18.9%; MSM -14.3%; SGL -12.7%; ADI -8.4%; SAP -8.2%
Other Economic data releases of interest…
- Tuesday: CB Consumer Confidence(USA); RBNZ Financial Stability Report, RBNZ Gov Orr Speaks(NZL); BOJ Gov Kuroda Speaks (JP)
- Wednesday: SNB Chairman Jordan Speaks (CHF); BOC Rate Statement, Overnight Rate (CAN); Prelim GDP(USA); ANZ Business Confidence NZL)
- Thursday: GDP (CAN); Crude Oil Inventories (USA)
- Friday: Manufacturing PMI (UK); Unemployment Rate (USA)
One to Buy
RMI – deep value financial play
Financial shares retraced almost 10% in the last two months. RMI is significantly oversold and the share is currently trading at a discount.
Technically it has found support at R38,50 in the past. We expect this support level to hold and would be buyers at around R39, 00.
Buy RMI at R39,00, with a medium-term target of R44,00 (12,5% upside). Apply a Stop loss of R37,75.
Short term Ideas
MTN: Go long below R116.00, stop loss R108.45, target price R130.00
FSR: Buy below R61.15, stop loss at R59.90. Target R65.00
Long Term Ideas
- African Rainbow Minerals: Buy at R110 or less.
- Dischem: Buy dips below R30.50 for a move above R37.00
- Shoprite: Hold. Target of R285.
- Anglo: Buy below R295.00
- Sasol: Position closed at R450 for a 12.5% gain. We will look to buy back lower.
- Aspen: Accumulate on weakness below R260.
- Sygnia: Add below R12.50.
- Santova: Moving higher, place a stop loss at R3.10. Hold.
- Merafe: Accumulate below R1.55.
- Jubilee: Speculative buy below R0.50.
- MTN: Maintain position, accumulate for long term below R120.00.
- Glencore: Still bullish. Hold
- Wescoal: Long term buy. Add below R1.80
- Naspers: Increase exposure below R3,000.