The stars are aligning for global growth and investors love it

by , 01 August 2017
The stars are aligning for global growth and investors love it
Global stocks are making record high after record high on the back of monetary policy that remains accommodative globally, inflation that's surprisingly low, the oil price below $50 and improving manufacturing data.

All this positivity is feeding into investor sentiment and it appears the rally that started out as a “Trump Bump” is growing stronger daily.

Locally, it's all about confidence, confidence in the economy, the mining sector, land and our leadership have been at record lows. It that changing? Do the markets see a silver lining?

The JSE Top40 Index was up 1,6% last week, and looks likely to gain 6% for the month of July, reaching record territory. Is this the tipping point for the bears? Will the bulls have a charge?

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It all depends on the Secret ballot!
 
Most of our recent calls have done well; the market has rallied strongly, up 6% in a month. We would not be buying at current levels.
 
The elephant in the room this week is the Secret Ballot, will Mbete “allow it”?  (We hear that Ballot boxes are being prepared and ballot forms printed.)
 
If the secret ballot is allowed, expect the Rand to strengthen by 30 to 40 cents.
 
Good for banks, bad for Resources, good for industrials but most importantly a boost in confidence which should offset the currency impact.
 
All eyes will be on parliament for voting on 8 August….
 
One to Sell
 
USDZAR FX Trade: The Rand has been sliding on a capitulation in business confidence, Eskom, etc.
 
If you want to profit from a change in trend and the Secret Ballot is allowed then: sell USDZAR at R13,25 (or higher) for a potential rebound to R12,90.
  
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Update: We expect increased volatility, so tighten up on stop losses.
 
Short Term Ideas
  • Vodacom: Our short is in the money – Hold for target of R165.
  • Sasol: Lift stop loss to R380 to lock in a minimum 4.1% gain. Target remains R407.50.
  • PSG: Position closed for a gain of 10.6% gain in 6 weeks.
  • Sibanye Gold: Starting to move up from entry at R15,00. Hold for a break above R17.
Long Term Ideas  
  • Ascendis: A dip below R20 offered a good entry point. Buy below R21
  • Holdsport: We were fortuitous with the Buy call last week, the offer from L4L was increased by 16% and it remains a cheaper entry - Hold
  • BidCorp: short trade is slightly underwater, apply stop loss on a close above R321.00.
  • MTN: Took a knock on trading update, results due 3 August – Hold.
  • Coronation: Kicking up. Move Stop loss to R66 to lock in profit and Hold.
  • Invicta: Buy Below R52.50 and wait for a rally.
  • HyProp: Is now in the money, keep a tight stop loss (R121) as Interest rate cut may provide support. Sell at R120.
  • Glencore: Has rallied 10%, remain long.
  • DBXEU: Improving sentiment in Europe. Accumulate below R52.50
  • Wescoal: Long term buy. Add below R2.15
  • Famous Brands: At support – add below R125 - long term
  • Naspers: Responded nicely, Making record highs. Take profit at R3000!
  • Tongaat: Hold, longer term target of R170.
  • MediClinic: Responding nicely - Hold.
  • Richemont: Solid results from LMVH, Maintain long position at R108.
  • Massmart: Accumulate below R110.00
  • Tiger Brands: Close position at R404.00. 
(This article is an extract from Prodigy’s weekly Investor Digest. For more information contact Gavin McCarter on gavin@prodigyam.co.za.) 

Last week’s movers and shakers…
 
Best Performers: Transhex, 14.3%, Anglos 14.1%, Kumba 9.4%, Sasol 8.4%, Goldfields 7.2% and Glencore 7.1%.
 
Worst Performers: Murry& Roberts -12.8%, Bats -8.3%, Implats and Reinet -5% and Intuprop -4.9%.
 
Commodity counters drove the RESI up 6.5%. Bats and Reinet fell sharply on Friday due to tighter restrictions from the Federal Drug Administration.
 



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