Emerging Markets still at the mercy of Trump

Emerging Markets still at the mercy of Trump

President Trump has pushed forward with additional rhetoric about bigger tariffs against China. And even changing significant legislation to block Chinese investment into “key” sectors for economic and national security. 

 

After Daimler warned its outlook for the year ahead isn’t positive considering the impact of tariffs could have, investors are liquidating higher risk investments for safe haven assets.  

 

This has pushed China to shore up its financial system and mitigate risk by decreasing the reserve ratio requirement by 50 basis points (0.50%). This will unlock $108 billion of liquidity and could potentially be positive for resources. 

 

Trump’s escalating trade war could not have happened at a worse time for emerging markets who are grappling with monetary policy tightening and rising interest rates in developed markets. Rising yields are generally negative for emerging markets. 

 

Investors should not be too aggressive with buying right now as we could see another strong sell off in the coming days before the market bounces into year end. Use the volatility to buy good quality shares on the cheap. 

 

The week ahead: 

  • Local Data: Quarterly Employment Stats (26/06), PPI (28/06), Money Supply, Trade Balance, SA Budget Summary (29/06) 
  • Results Due: OMN, WSL (26/06); AXL (27/06); SAR, SEP, TTO (28/06); ADW, APH, ANS, ART, ECS, ESR, GLI, HDC, ILE, NCS, PGB, SDC, SNH (29/06)  
  • LDT (26/06):  BTI, CLS, DLT, IVTP, LBHP, OCE, PFG, SNV, TBS, VLE 

Last week’s movers and shakers…

Best Performers: BAT 11.7%; SGL 11.4; HAR 7.8%; DSY 4.7%; ADI 4.7% 

Worst Performers: TSX -17.1%; CMH -9.7%; MMG -8.7%; IMP -8.2%; LHC -6.7% 

 

Other Economic data releases of interest… 

  • Tuesday: CB Consumer Confidence (USA), ANZ Business Confidence (NZL) 
  • Wednesday: BOE Gov Carney Speaks (UK), Crude Oil Inventories (USA); BOC Gov Poloz Speaks (CAN) 
  • Thursday: Official Cash Rate, RBNZ Rate Statement (NZL), Final GDP (USA) 
  • Friday: Current Account (UK), GDP, BOC Business Outlook Survey (CAN) 

 

No Buys this week, wait for current uncertainty to subside and refer to Long Term Ideas below for stocks to buy at good levels.  

 

Short term Ideas 

  • Top40 Future: The June Contract closed at 50,332 for a small profit. 
  • RMI: Entry R39.00, has reached stop loss at R37.75 – close positions.  
  • MTN: position closed at R108.45 
  • FSR: Entry at R61.15, closed at stop loss of R59.90.  

 

Long Term Ideas 

  • Coronation: Buy below R60.00 for a move back to R80 
  • AB InBev: Buy below R1,250 for a move to R1,475. 
  • ARM: Price is finding support but volatile. Hold 
  • Dischem: Accumulate below R30.00 for a move above R37.00 
  • Shoprite: Bulls trying to keep the price above h 200-day moving average. Hold. 
  • Anglo: Closed at R303.30 for 6.8% gain.  
  • Aspen: Accumulate on weakness below R260. 
  • Sygnia: Add below R12.50. 
  • Santova: LDT today, maintain 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 R110.00. 
  • Glencore: Still bullish. Hold 
  • Wescoal: Long term buy. Add below R1.80 
  • Naspers: Management focused on reducing share price discount. Buy dips below R3,000.  

 

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