Emerging Markets go from Cheap to Cheaper

by , 04 September 2018
Emerging Markets go from Cheap to Cheaper
Emerging market currencies are losing ground against the majors, giving international investors more “bang for their buck”. The latest bout of weakness comes on the back of CPI in Turkey spiking to 18% and PPI to 32.1%. International investors will not be rushing in just yet as they await a week full of data from emerging markets.
We expect volatility to increase as global markets grapple with, a possible Bad Brexit, ongoing Trade War negotiations and Italy’s budget woes.
  • Argentina pushes interest rates to 60% and its currency still weakened
  • US preliminary GDP should grow 4.2% quarter on quarter.
  • US unemployment approaching multi-decade lows
  • US Inflation ticking higher signalling interest rate hikes into year end
  • High correlation of the VIX and S&P500 signals investor complacency
The week ahead:
  • Local Data:  GDP Q2 (04/09); Current Account, Electricity Generated (06/09); Gold and FX Reserves, Reserve Bank Assets and Liabilities (07/09)
  • Results Due: CSB, MDI, RNG, RCL, SHG (28/08); AIP, BAU, GRT, MUR, NRP, NT1 (29/08); AVL, ASR, MST, OLG, RSG, SNT, TOR (30/08); BEL, CAT, GND, HYP, OMU, SCP (31/08)
  • LDT (03/09): SOLBE1, BIL, CLH, EMI, GFI, GLN, ITE, MPT, NED, NVS, RES, SOL, SHP, SBKP, SBPP, and YYLBEE, ITE (Special Dividends)
Other Economic data releases of interest…
  • Monday: US Market Closed (USA); Retail Sales (AUS); BOJ Gov Kuroda Speaks (JP); Manufacturing PMI (UK)
  • Tuesday: Cash Rate, RBA Rate Statement, RBA Gov Lowe Speaks (AUS); Inflation Report Hearings (UK); Manufacturing PMI (USA)
  • Wednesday: GDP (AUS); Trade Balance, BOC Rate Statement, Overnight Rate (CAN); Services PMI (UK)
  • Thursday: ADP Non-Farm Employment Change, Non-Manufacturing PMI, Crude Oil Inventories (USA); Trade Balance (AUS)
  • Friday: Unemployment Rate (CAN); Non-Farm Employment Change, Unemployment Rate (USA)

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Short Term Ideas
  • GFI: Long at R35.25 is in the money, hold for a move back above R40. Target it R43.75 with stop loss of R32.55.
Long Term Ideas
  • FSR: Responded nicely to buy call at R63.25.  Tighten Stop loss to R69.00 to lock in 9% gain. Move Target price to R73.50. Hold
  • Discovery: Up 20% on this trade, place stop loss at R160.00 and Hold for results
  • Coronation: Buy below R60.00 for a move back to R80
  • Dischem: Up 14.4%, raise target to R36.50 and Stop loss to R32.00. Hold
  • Shoprite: Strong support above R200. Hold.
  • Aspen: Approaching R300. Open gain 16.2%. Hold
  • Sygnia: Support building above R10.00. Add
  • Merafe: Consolidating above R1.55. Accumulate below R1.55.
  • Jubilee: Speculative buy below R0.50.
  • MTN: Despite the Nigerian shock the operating businesses remain solid, we view this as a buying opportunity, add to existing position below R88.00.
  • Glencore: Open gain over 20%. Hold
  • Wescoal: Long term buy. Add below R1.80
  • Naspers: Strong bounce after sell-off. Up 26% on position.  Buy dips below R3200.

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Emerging Markets go from Cheap to Cheaper
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