Emerging Markets on the back foot as the Dollar strengthens

by , 29 May 2018
Emerging Markets on the back foot as the Dollar strengthens
The rand has bucked the emerging market currency trend by strengthening 7.6% year to date. The Brazilian Real, Indian Ruppee and Turkish Lira have all weakened over 7%. The Turkish Central bank surprised the market with its 3% interest rate hike last week.

We should see an increase in market and currency volatility leading into Friday's US employment data, which is expected to stay near the 18-year low hit in April. The market will be eyeing the average hourly earnings as a gauge for an uptick in US inflation. The Fed is expected to raise rates at its next meeting (mid-June), but committee members are cautious about raising rates quickly due to other regions still maintaining accommodating policies.

Any sell-off will be short lived and we expect the markets to rebound to their previous highs by year-end.
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Last week’s movers and shakers… 
One to Buy
RMI – big value financial play
Financial shares retraced almost 10% in the last two months. RMI is significantly oversold and the share is currently trading at a discount.
Technically, it has found support at R38,50 in the past. We expect this support level to hold and will be buyers at around R39,00.
Buy RMI at R39,00, with a medium-term target of R44,00 (12,5% upside). Apply a Stop loss of R37,75.          
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Short term Ideas 
  • MTN: Go long below R116.00, stop loss R108.45, target price R130.00
  • FSR: Buy below R61.15, stop loss at R59.90. Target R65.00

Long Term Ideas 
  • African Rainbow Minerals: Buy at R110 or less.
  • Dischem: Buy dips below R30.50 for a move above R37.00
  • Shoprite: Hold. Target of R285.
  • Anglo: Buy below R295.00
  • Sasol: Position closed at R450 for a 12.5% gain. We will look to buy back lower.
  • Aspen: Accumulate on weakness below R260.
  • Sygnia: Add below R12.50.
  • Santova: Moving higher, place a stop loss at R3.10. Hold.
  • Merafe: Accumulate below R1.55.
  • Jubilee: Speculative buy below R0.50.        
  • MTN: Maintain position, accumulate for long term below R120.00.
  • Glencore: Still bullish. Hold
  • Wescoal: Long term buy. Add below R1.80
  • Naspers: Increase exposure below R3,000.  

Emerging Markets on the back foot as the Dollar strengthens
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