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JSE set for stimulus induced rally this week

by , 12 August 2020
JSE set for stimulus induced rally this week
Emerging markets and the JSE should continue to grind higher on the back of renewed optimism over stimulus packages from the US.

President Trump has less than 3 months to “ensure” a win. He is pumping further stimulus into the US economy. On Saturday he signed a few executive orders, one of them to defer payroll tax deductions, hinting that they will be scrapped anyway.

The recorded amount of stimulus has seen companies weather the storm in the 2nd quarter according to latest results.

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US Earning season surprises analysts and investors
 
Factset reported 9 out of 10 companies in the S&P500 have released 2nd quarter earnings, with 83% of them reporting EPS above analyst estimates. If this is maintained it will be the highest percentage since Factset started recording in 2008. This highlights the impact of all the financial assistance provided to American corporations and consumers since the Covid-19 induced economic crisis.
 
Recent Ideas Update…
 
Buy MTN below R57.00
 
MTN released a solid set of results that highlights Management and the board have taken the right steps. A strong foundation to grow from has been set up and earnings over the next 12 months should be robust and grow steadily.
 
This will see MTN push to our target price of R75 in the next twelve months. This is a longer-term opportunity for your portfolio.
 
Top40 future trades through stop loss
 
Market rallied through stop loss of R53,000 but reversed, we will look to re-enter when the time is right.
 
TFG Rights issue, price remains above break even…
 
TFG’s share price has remained above the breakeven level for the rights issue. Place a stop loss at R73.00 to protect from a rally through the resistance level.
 
Longer term value opportunities
 
Our recent buys in EOH, BLU and DGH are still at below the entry levels suggested last week. We see these as good longer-term value plays for a portfolio.
 
Here’s the entry levels…
  • Buy Blue Label below R3
  • Buy EOH below R5.50
  • Buy Distell below R77.50
See you next week.
   
Guy Algeo,
Contributing Editor, Money Morning
 


JSE set for stimulus induced rally this week
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