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Emerging Markets given a boost by Jackson Hole - TWO to buy

by , 21 September 2017
Emerging Markets given a boost by Jackson Hole - TWO to buy
While everyone was looking for clues as to the future of easy monetary policy, both Janet Yellen and Mario Draghi kept mum at Jackson Hole.

Both speeches were taken as more dovish, which implies accommodation to continue for longer. This has seen the Rand trade below R13 to the USD, the strongest level for August and the Euro trade at its strongest level against the USD in 30 months.

CPI came in lower as expected and now opens the prospect of another 25 basis point (0.25%) drop in interest rates this year. 2nd quarter GDP growth should surprise to the upside next week, which will signal the recession was short lived.

The JSE added 2.1%, with Midcaps increasing 2.8%, as we expected small and mid-cap are closing the gap and offer better rewards in the short-term. We still expect small and mid-cap stocks to outperform the market into year end.

In the week ahead:
  • Wednesday: Money supply, Private sector credit extensions, Monthly budget balance all for July
  • Thursday: PPI, Electricity production and consumption and Trade balance for July
  • Friday: BER Manufacturing PMI and Naamsa vehicle sales for August
  • Results expected: CSB, MST, AVL, RCL (29/08); CVH, GRT, HIL, SAC, ASR, TOR, SGL 30/08); HWN, SHFF, SCP, BEL, DST. RSG. SNT, MFL (31/08), BAU, HYP (01/09)
  • Offshore Results Expected: China Petro and Chemical, Surgtnftegaz, Yanzhou Coal, Catalent Inc, Prospect Capital (29/08); Bank of Nova Scotia, Bank of Montreal, POSCO, Best Buy (30/08); Toronto Dominion Bank, Dollar General, Cambell Soup, Cooper (31/08);  No Major Company Releases (01/09)
  • LDT (29/08): AFE, HMN, ILU, LBH, NVS, and RES

Last week’s movers and shakers…
Best Performers: IPL 15.2%, EXX 14.2%, SHP 10.8%, ASR 9.6%, KIO 7.4% and MSM 6.8%.
Worst Performers: MUR -9.6%, PAN -8.7%, SNH -8.5%, ANG -8% and TOR -6.2%.
Other Economic data releases of interest…
  • Tuesday: CB Consumer Confidence (USA)
  • Wednesday: ADP Non-Farm Employment Change and Crude Oil Inventories (USA),
  • Thursday: Private Capital Expenditure (AUS), Unemployment Claims (USA), GDP (CAN)
  • Friday: Caixin Manufacturing PMI (CHN), Manufacturing PMI (UK), Unemployment Rate and ISM Manufacturing PMI (USA) 
Two to Buy
Steinhoff – Profit from Panic
Last week Steinhoff’s share price was thumped by 8,5% on the back of a sensationalist article to boost magazine sales. They didn’t provide much “new information” about the company’s litigation with an ex-joint venture partner, for which they have already made provision for a possible monetary settlement.
Steinhoff and Christo Wiese, have slammed the allegations as baseless and without merit.
The deal with Shoprite will be value accretive and buyers have an opportunity to accumulate shares at a favorable price. Buy below R61
Jubilee – yet to respond to high Platinum Price
I find it interesting that Jubilee shares have not responded to the better PGM prices and successful ramp-up of the Hernic operation. The share price has flatlined at 68c for the past year, nonetheless it holds speculative appeal and is looking more attractive by the day. Buy at current levels
No Sells this week.
Shorter Term Ideas
  • Top40 Future: Position Closed.
  • Pioneer Foods: Carving out lower highs and lower lows, still bearish. Stop loss remains at R135.
  • Standard Bank: Stop loss triggered at R169.00, short closed for a small loss.
  • Sasol: Short is profitable, leave stop loss at R400 to lock in a profit.
  • USD/ZAR: Profit target hit for a 46c (3.42%) gain – position closed.
  • Vodacom: Sitting on a small gain, sell off gaining strength. Target R165, maintain stop loss at R190.00
  • Sibanye Gold: Adjust stop loss to R18.50 to lock in a 23.3% gain, keep the target price at R24.50.

Long Term Ideas
  • African Rainbow: In the money, Results out next week. Hold.
  • Old Mutual:  Nicely in a profit, buy dips below R33.
  • AECI: Hovering at the entry price. Buy below R105.00
  • MTN: A push to R130 is imminent, and we banked a R2.50 dividend. Hold
  • Coronation: Trading at a high for 2017, upward momentum strong. Keep stop loss at R66.
  • Glencore: Rally intact, hitting levels last seen in 2014. Hold
  • Wescoal: Long term buy. Add below R2.15
  • Famous Brands: Recovering after a weak update, accumulate below R125
  • Naspers: Up over 27%. More upside to come. Hold
  • MediClinic: A sustained break above R129 signals a move to R139 is on the cards. Hold.
  • Richemont: A new higher low creates support above R112. Maintain stop loss at R112 to lock in gains.

(This article is an extract from Prodigy’s weekly Investor Digest. For more information contact Gavin McCarter on gavin@prodigyam.co.za.

Emerging Markets given a boost by Jackson Hole - TWO to buy
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