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This market sector was obliterated by the South Africa's junk status news

by , 10 May 2017
This market sector was obliterated by the South Africa's junk status news
I recently told investors I'm not hot the South African Retail Sector.

In short, the FNB Consumer Confidence index sits at its lowest level since 1985. People just aren't running out there and buying new clothes and appliances at the same pace they had done before.

But there's another casualty to South Africa's junk status news.

The sector I'm about to reveal to you has been thoroughly obliterated in a single month.

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On behalf of our Board of Governors, I’d like to invite you to join The South African Investor
 
Our aim is, quite simply, to protect and expand your personal wealth through the traditional methods of making money…
 
However, I have to tell you upfront: at our last Executive Committee meeting, our members proposed 1,000 nominees for membership. The reality is, though, we can only accept 275 new members this year.
 
We have to limit numbers, and you’ll soon see why…
 
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Thanks to South Africa's Junk Status - new car sales just hit the lowest point since 2009!

 
April 2017 car sales stats were released in the first week of May.
 
New vehicle sales for April 2017 is down 5,392 or 13.4% from 40,348 cars sold in April 2016 to 34,596 cars sold in April 2017.
 
Rudolf Mahoney, Head of Brand and Communications at WesBank, said: “This sales performance is not just bad news for the new vehicle industry, but also the country. Historically, the performance of the new vehicle market has served as a leading indicator for economic activity, suggesting that the outlook for year could be worse than initially forecast.”

 

After a strong recovery since 2016, car sales crashed in April


Due to the weak rand, car sales started 2016 off badly. But they recovered with higher car sales virtually every single month from April 2016 up to January 2017.
 
February and March 2017 slowed down. But as South Africa got downgraded to junk status and consumer confidence fell, so did new car sales in April.
 
People just don’t want to take the risk of buying a new car, and see interest rates rise in the coming months making their purchase unaffordable.
 
Bank data also shows that of the people that still attempted to buy cars, there was a 12.6% increase in people getting fixed interest loans, showing the fear of rising interest rates.

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There’s nothing ‘special’ about these people. They have no special skills or training. But they DO have access to a little-known stock market secret.
 
 
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Watch out for these investments after South Africa's junk status is priced into the market…

 
People buy cars with loans. So, higher interest rates (or the fact that people are worried about higher interest rates) will slow down car sales.
 
It’s already happened in a short month following South Africa’s junk downgrade.
 
I expect we’ll see an interest rate hike in the coming year, and that people will further tighten their purse strings.
 
While this will possibly be a good thing for second hand car dealers, new car sales will continue to struggle.
 
I would be wary of investing in companies like Imperial, CMH and Barloworld. These companies success is closely linked to new car sales. These companies’ shares rallied between November and February 2017 as car sales increased. But now that sales are crashing thanks to South Africa's junk status, I expect bad performance for the remainder of 2017.
 
Here’s to unleashing real value
Francois Joubert







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