This might be the most important week for determining the market direction for the rest of the year, we have:
• A Fed announcement on their tapering on Wednesday
• A SARB announcement on interest rates om Thursday
• Futures closeout on Thursday
The market is expecting (with a 98.6% probability) the Fed to not pull the trigger on an additional rate hike. On the flip side, local interest rates are expected to be reduced by 25 bps (0.25%). This will increase the likely hood of Rand weakness due to the inflation differential between SA and developed countries.
Lower interest rates are generally good for the markets; our retailers, local property stocks and banks should rally. And Rand weakness is good for the Rand Hedge counters. So keep an eye out for opportunities in these sectors.
Futures closeout isn't expected to be a big one but the market ALSI40 future has been gapping at the open quiet often lately.
Added to the above we have 24 companies with their last day to trade today to be entitled to receive their dividend. And STAR lists on Wednesday, ticker symbol SRR.
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The week ahead:
Wednesday: CPI for August
Thursday: SARB Interest Rate Announcement
Results expected: SFN, RLF, ALA, EOH, ACT, FCR (19/09); CHP, REM, ELR (20/09); PAN, PGL, GTR (21/09); ATL, CND, UCP (22/09); RMI (25/09)
LDT (19/09): ADI, ASR, BEL, BID, BVT, CFR, CLI, CPIP, CSB, DST, EPP, GRT, HIL, IPL, IPLP. KAP, MRF, OML, PFGP, SNT, TEX, TFGP, TOR and WSL
Last week’s movers and shakers…
Best Performers: APN 8%, REI 4.7%, HMN 4.5%, ASR 4.3% and CCO and MNP 4.2%
Worst Performers: TSX-20%, IMP -16.5%, ADI -9.9%, PAN -7.3%, NHM -7% and SGL -6.2%
Rand hedges dominated last week as the rand weakened over 2.6%, but it wasn’t enough to stop the resources selloff to weaker metal prices. Platinum was the biggest loser with a decline of 3.1%.
TSX is often on the best and worst performers list, the volatility comes from it being illiquid and at times the spread is significantly wide.
Other Economic data releases of interest…
Tuesday: Monetary Policy Meeting Minutes (AUD); Building Permits (USA)
Wednesday: Retail Sales (UK); Crude Oil Inventories, FOMC rate announcement (USA)
Thursday: GDP (NZL); Monetary Policy Statement (JPN); ECB Mario Draghi Speaks (EU); Unemployment Claims (US)
Friday: CPI, Retail Sales (CND)
Two to Buy
Nedbank – Interest rate cut will give a much-needed boost
Contrary to common sense, an interest rate decrease is good for SA banks, it allows them to extend more credit to clients who have a renewed capacity to take on debt.
Nedbank is the second cheapest bank on a PE basis but has the best upside potential in the short term. A cut in interest rates could be the boost it needs to push up 10% to its recent high.
Buy Nedbank below R207.50 for a move to R230.00. Place stop loss at R199.50
Tiger brands – Speculative buy as Tiger bounces from support
The share price has sold off steadily to its support and has presented a good level to enter a short-term trade. An interest rate cut will be supportive of food producers, who have had a tough time as their margins have been squeezed and volumes have been thin. An increase in disposable income will give consumers more cash to spend. Tiger has continued to gain market share in the Top End Grocer Bread and Maize Meal categories.
Speculative buy below R375 for a short term move to R400. Place stop loss at R360.
One to Sell
Aspen – Rally losing momentum
After positive results (Revenue and NHEPS increased 16%) on Thursday, APN rallied above R300 and cents away from a 2017 high. This rally has run out of steam and profit taking will see the share price fall lower over the next few days.
Short sell Aspen above R305. Target price R285 and place a stop loss at R315.
Shorter Term Ideas
Pioneer Foods: Banked a 9.43% on this short last week.
Vodacom: Falling lower to support at R160.00, place stop loss at R159.00, target remains at R180.00
Sell the Rand: We are nicely in the money, stop loss at R13.08 and take profit at R13.40
Long Term Ideas
EOH: Pulled back to support. Remains a buy below R107.50
Tharisa: Buy dips below R18.00
Steinhoff: Pulled back strongly, bounce due from here. Hold.
Jubilee: Up 17.65%. Hold
African Rainbow: Consolidating around R110. LDT next week for R6.50 dividend. Hold.
Old Mutual: Nicely in a profit. Hold
AECI: Price consolidation at support. Buy below R105.00
MTN: Pulled back to support. Buy below R122.50.
Coronation: Strong support around the R67 level. Keep stop loss at R66. Hold
Glencore: Upward momentum taking a breather. Hold
Wescoal: Long term buy. Add below R2.15
Famous Brands: Consolidating above R115.00. Accumulate Below R120.
Naspers: Resistance at R3,000 being tested, a sustained break is imminent. Hold
MediClinic: Price near support. Hold.
Richemont: Making record highs. Increase stop loss to R115 to lock in gains. Hold
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(This article is an extract from Prodigy’s weekly Investor Digest. For more information contact Gavin McCarter on firstname.lastname@example.org.)