Market survives “Risk Event Storm”

by , 19 June 2018
Market survives “Risk Event Storm”
Last week was a busy week with the market sailing through a gauntlet of central bank meetings, escalating trade tensions and a historic meeting between the US and North Korea.

Surprisingly the JSE held up relatively well buoyed by a weaker Rand. We've also seen volatility (measured by the VIX) drop back towards 12, a level that signals the market might not be pricing in the risk of a “Trump Trade Tantrum” as China retaliates with tariffs.

Fitch left SA's credit rating at Junk status citing “low trend growth, sizeable government debt and contingent liabilities and the highest inequality in the world, which raises policy risks”.

The latest iteration of the Mining Charter is an improvement from 2017's in a number of ways but notably, the once empowered always empowered clause. This is positive as it means most mining houses will have 5 years to “top-up” to 30%.

Thursday is futures close-out and the direction will be dominated by options traders hedging their positions. There are more Puts than Calls and that will likely see them buying the market if offshore markets bounce from here.


The week ahead:
  • Local Economic News: CPI (20-06), Current Account Balance (21/06)
  • Results Due: TSX (20/06); RACP (21/06); NPN (22/06)
  • LDT (18/06):  AWA, HCI, LHC, MRP, QFH, RLO, SPP, TKG, TON, VOD, VKE SYG, TDH, TRE, TSH 
  •  
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Last week’s movers and shakers…
 

 
Best Performers: TSX 20.7%; DRD 11.1%; SNV 7.9%; AB inBev 7.5%, PanAf 6.9%

Worst Performers: GND -26.1%; SGL -8.5%; VOD -6.9%; NRP -6.2%; AGL -5.7%
 
Other Economic data releases of interest…
  • Monday: ECB Forum (Monday until Wednesday) (EU); MPC Meeting Minutes (AUS)
  • Tuesday: Building Permits (USA)
  • Wednesday: Crude Oil Inventories (USA); GDP q/q (NZL)
  • Thursday: Swiss Interest Rates (EU); UK Interest Rates (UK)
  • Friday: OPEC Meeting, CPI (CAN)
One to Buy
 
Buy the ALSI 40 Future at 50,250 into Closeout

As mentioned above, the market’s direction will be dominated by Options traders hedging into closeout. We also have Napser’s results due tomorrow and Tencent at a critical support level.
 
If Napsers and Tencent have a bounce tomorrow, we’re more likely to trade up towards the recent high above 52,500 into the futures closeout than back towards the channel low below 49,000.
 
Keep an eye on the Top40 Future and if it retreats to 50,250, look to enter around this level. For a move to 52,250. Let the future expire in the auction. Maintain a stop loss at 49500.
 
 
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Short term Ideas
  • RMI: Entry R39.00, stop loss R37.75, target R44.00
  • MTN: Awaiting a 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      
  • Coronation: Buy below R60.00 for a move back to R80
  • AB InBev: Buy below R1,250 for a move to R1,475.
  • ARM: Finding support at our entry. Hold
  • Dischem: Accumulate below R30.00 for a move above R37.00
  • Shoprite: Support building at the 200-day moving average. Hold.
  • Anglo: Maintain stoploss at R303.30 to lock in 6.4% gain.
  • 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 R110.00.
  • Glencore: Still bullish. Hold
  • Wescoal: Long term buy. Add below R1.80
  • Naspers: Results due tomorrow. Increase exposure below R3,000.


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Market survives “Risk Event Storm”
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