Complete downgrade averted as Moody's gives SA one last shot - with one to buy

by , 28 November 2017
Complete downgrade averted as Moody's gives SA one last shot - with one to buy
Last week South Africa side stepped the exclusion from the World Government Bond Index, as Moody's didn't downgrade its local currency. Instead, Moody's placed South Africa on Credit Watch. This is a period of up to 90 days where it critically evaluates any material changes and can downgrade SA at any-time.

S&P downgraded SA, which sparked panicked selling of the rand after the JSE closed, but it recovered over 2% yesterday to end where it was on Thursday last week. Fitch kept SA at Junk status with a stable outlook earlier last week. This gave the rand a little boost before the other ratings agency's decisions.

It’s important to note that SA is on a precipice and a clean sweep of junk statuses is almost a given. Ramaphosa would have to win at the ANC December conference for Moody’s to kick the downgrade further down the road, as Ramaphosa is perceived as the dependable leader.
Should he be elected, we could see a significant rally in the rand, due to his pro-investment stance.
We still believe investors should be using any rand strength to adjust their asset allocation and offshore exposure. This is due to the diversification benefits. Contact Prodigy to make use of your R1 million allowance before it expires on 31 December.

Last week’s movers and shakers…
  • Best Performers: TFG 9.6%, KIO 9.1%, MRP 8.5%, BGA 7.2%, RLO 6.9%, EXX and SFN 6.5%
  • Worst Performers: MUR-16.5%, MEI -13.7%, GND -6.3%, MPT -5.8%, MMG -4.3%, HAR -4.2%

One to Buy
Ascendis Health – Rights Issue at R20 provides 29% upside
Ascendis Health has announced a fully underwritten rights issue at R20 a share. With Ascendis trading below R16 a share, this is a strong buy indication. It highlights to the market that a significant investor is happy to accumulate a sizeable position much higher than the current price.
And normally this higher underwritten price tends to act like a magnet pulling the price higher as it nears the final take up date. Make sure you buy before Friday, the last day to trade.
Speculative Short-Term Buy – Buy Ascendis below R16.00 for a potential 22.5% gain
None to Sell

Shorter Term Ideas
  • All short-term positions have closed out

Long Term Ideas 
  • Sygnia: up nicely since tipped, trading above R14.00. Hold
  • PPC: Buy dips below R7.00.
  • Santova: Buy below R3.30.
  • Merafe: Bounce from support, buy at R1.55 or below.
  • Steinhoff: Awaiting positive news. Hold.
  • Jubilee: Bouncing from Support. Hold.
  • African Rainbow: Zig-Zaging on a Volatile rand, up over 25%. Hold.        
  • MTN: R130 resistance proving to be strong. Hold
  • Glencore: Still above support. Hold
  • Wescoal: Long term buy. Add below R2.15
  • Naspers: Results out tomorrow. Hold 

Have you used your 2017 Investment Allowance?
All your offshore investments allowances expire at the end of 2017. Prodigy can invest your funds securely offshore. Please contact me without delay before you miss out.

Complete downgrade averted as Moody's gives SA one last shot - with one to buy
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