Q1 GDP decline surprises market

Q1 GDP coming out at -2.2%, the worst since Q1 2009, reflects that the Ramaphoria optimism has not resulted in any tangible results and likely kept investors complacent 

 

The Rand strength is hard to explain and perhaps it will weaken while investors and portfolio managers digest the impact of these GDP figures on their investments.  

 

Look to pick up the quality rand hedges that have been sold off in the Emerging Market risk off sentiment and the surprisingly stronger Rand.  

 

The week ahead: 

  • Local economic data releases: Q1 GDP (05/06), Manufacturing Production and Sales (07/06) 
  • Results Due: PPC (07/06); NVS, STP (08/06) 
  • LDT (05/06): AFEP, ARL, BAW, CTA. CVW, CML, DIA, DIB, GPA, GPB, IAP, INLP, INPR, INPP, INPPR, KAL, OAS, PIK, RPL, SEA, THA, TCP, VMK, TDHP 

Last week’s movers and shakers… 

Best Performers: FFB 16.1%; MUR 8.7%; SGL 8.3%; IMP 6.2%; ZED 6.2% 

Worst Performers: TSX -23.3%; SNH -23.1%; TON -9.8%; TOR -8.1%; BAT -7.4% 

 

Other Economic data releases of interest… 

  • Tuesday: RBA Rate Statement, GDP (AUS); ECB President Draghi Speaks (EU) 
  • Wednesday: Trade Balance (CAN); Crude Oil Inventories (USA); Trade Balance (AUS) 
  • Thursday: BOC Gov Poloz Speaks (CAN) 
  • Friday: Unemployment Rate (CAN) 

 

One to Buy 

 

AB Inbev bottoming out and offering value at R1,150 

 

AB Inbev has sold off on a stronger Rand and a sell-off in global consumer stocks. It appears to finally be bottoming out. After strong numbers last month, we believe accumulating around these levels will reward long term investors. It’s paying a dividend of over 4% in EURs and is in a defensive sector 

 

A driver for future growth comes from consumers opting for premium brands – including beer. Budweiser is also the official beer for the FIFA World cup, which will boost sales and exposure for one of AB Inbev’d beers. 

 

Accumulate ANH below R1,225 for a move to R1,475. 

 

Short term Ideas 

  • RMI: Entry R39.00, stop loss R37.75, target R44.00 
  • MTN: Bounced nicely and needs to break above R121.36 to open up R130.00 
  • FSR: Buy below R61.15, stop loss at R59.90. Target R65.00 

 

Long Term Ideas 

  • ARM: Buy at R110 or less. 
  • Dischem: Accumulate below R30.00 for a move above R37.00 
  • Shoprite: Hold. Target of R285. 
  • Anglo: Bounced strongly, place stop loss at R285.00  
  • 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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