Back to Reality... Balancing the 2018 Budget
Last week, the market saw a strong bounce following Zuma's 'sudden' resignation after re-iterating he "hasn't found someone that can tell him what he has done wrong”.
Traders started to take profit on Friday, which will see the markets trend lower before the budget speech this week.
This sell off could be one of the last dips before a broader rally as President Ramaphosa tries to invigorate investor confidence to grow the economy as quickly as possible. He has tabled a ten “project” plan to do so.
But first, he will most likely have to shuffle a number of Ministers that have been complicit or turned a blind eye to state capture. This would mark a turning point and indicate the President is willing to clean house.
International investors will be eyeing the budget speech this week to see if fiscal and monetary discipline will improve to plug the deficit of +/- R50 billion.
Reigning in the bloated public sector that employs over 3.5 million people should be the starting point, but it will most likely be start with increasing taxes.
Expect an increase in fuel levies and sin tax, an accelerated implementation of sugar tax and a wealth tax in some form or another. We could even see VAT on fuel and property rates, but there's a much lower probability that this will happen, than other mentioned tax increases.
Last week's movers and shakers…
One to Buy - Anglo American offering better value
President Ramaphosa gave confidence to investors by announcing new negotiations around the Mining Charter. This is set to create a mutually beneficial relationship between all stakeholders. SA mining will benefit and offers an ideal opportunity to increase exposure to this sector.
We like Anglo American on a PE of 9.2, while its peers are on more demanding multiples. Buy Anglo American (JSE: AGL) below R285.00
Losers to sell
With the tax year end approaching fast, investors should consider netting off any losers against winners to reduce their capital gains.
This will allow you to re-base your purchase prices higher on the stocks you still want to hold onto going forward. You will effectively reduce your tax payable.
Long Term Ideas
Sasol: Buy below R400. Results due next week
Aspen: Trading statement very positive. Buy below R260. Results due 8 March.
Sygnia: Buy below R12.50.
PPC: Moving in the right direction, up over 10%. Hold
Santova: Buy below R3.00.
Merafe: Accumulate below R1.55.
Jubilee: Zambian mining rights at risk. Hold.
MTN: Buy Dips below R122.50
Glencore: Results out 21 February. Strong support at R60. Hold
Wescoal: Long term buy. Add below R1.80
Naspers: Buy dips below R3,300, while ensuring you aren’t over-exposed.
Maximise your Retirement Savings before 28 February 2018
Time is running out to take maximum advantage of the tax benefits of boosting your retirement savings. Every year you should be looking to enhance your retirement savings as much as possible. Contact Gavin McCarter to find out about low cost retirement saving options available. firstname.lastname@example.org