Emerging Markets on the back foot as Dollar strengthens

Emerging Markets on the back foot as Dollar strengthens

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.  


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