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Market review: resilient rand, weak banking counters and ECB’s QE

A look at what made market and company news last week and what’s expected this week.

The rand was fairly resilient over the last week (as was the case with emerging market currencies in general) with strength, capitulating into the ECB meeting and subsequent monetary easing announced.

shaun 1

Source: IG

However, comments from the central bank president Mario Draghi, that further interest rate cuts were unlikely, saw strength return to the euro against most major and emerging market currencies.

shaun 2

Source: IG

Local data

Manufacturing production decreased by 2.5% in January 2016 compared with January 2015. The largest negative contributions were made by the following divisions:

  • basic iron and steel, non-ferrous metal products, metal products and machinery
  • motor vehicles, parts and accessories and other transport equipment
  • furniture and ‘other’ manufacturing

Mining production decreased by 4.5% year-on-year in January 2016. The largest negative growth rates were recorded for copper, iron ore and diamonds. The main negative contributors to the 4.5% decrease were iron ore, copper and manganese ore. Gold was a significant positive contributor.

Companies

Banking counters were particularly weak over the last week, led by a dramatic selloff in FirstRand following its results release.

The company’s interim results revealed normalised earnings to have increased 9% against the prior year’s comparable interim period.

RMB Holdings interim results revealed normalised diluted earnings per share to have increased by 8.9% against the prior year’s comparative interim period.

Also within the sector, news of Old Mutual’s strategy to separate its underlying businesses (including Nedbank) and unlock value saw the following key proposals and motivations

  • Four strong businesses with combined pre-tax operating profits of GBP1.8 billion
  • Old Mutual Emerging Markets, Old Mutual Wealth, Nedbank and OM Asset Management to be separated
  • Managed separation expected to be materially completed by end of 2018
  • New capital management policy; intention to reduce group holding company debt materially; phased reduction of central costs


The following results within the broader financial sector are as follows:

Old Mutual full-year (FY) 2015 results showed pre-tax operating profit to have increased by 11% in constant currency terms and 4% in reported currency terms.

Rand Merchant Investment Holdings‘ interim results revealed normalised earnings to have increased by 4% against the prior year’s comparative interim period.

Sanlam FY 2015 results showed diluted headline earnings per share to have gained 11.6% against the prior year’s comparative. The net value of new life insurance business declined by 15%.

A summary of broader market results releases in the week were as follows:

Sasol interim results revealed a 23.9% decline in diluted headline earnings per share against the prior year’s comparative interim results.

African Rainbow Minerals interim results showed headline earnings to have decreased by 51% against the prior year’s comparative interim period.

Grand Parade Investments guided that the company expects a 92% to 100% decline in basic earnings per share for FY 2015 against the prior year’s comparative.

EOH Holdings interim results revealed diluted headline earnings per share to have increased by 23.1%.

AVI interim results revealed headline earnings per share to have increased by 11.3% % against the prior year’s comparative interim period.

Global markets, data

Global equity markets shrugged off a poor start to last week in the belated aftermath of another round of easing quantitative measures introduced by the European Central Bank (ECB).

shaun 3

Source: IG

In China, a trade surplus of US$ 32.59 billion was recorded for February 2016, narrowing from $60.61 billion reported a year earlier and missing market estimates. In February, exports fell by 25.4%, following a 11.2% decline in the preceding month. Imports tumbled by 13.8%, compared with a 18.8% drop in January.

In Europe, the European Central Bank (ECB) announced the following monetary easing measures in an attempt to aid inflation and economic growth within the region:

  • The interest rate on the main refinancing operations of the Eurosystem will be decreased by 5 basis points to 0.00%
  • The interest rate on the marginal lending facility will be decreased by 5 basis points to 0.25%
  • The interest rate on the deposit facility will be decreased by 10 basis points to -0.40%
  • The monthly purchases under the asset purchase programme will be expanded to €80 billion
  • A new series of four targeted longer-term refinancing operations (TLTRO II), each with a maturity of four years, will be launched

 

Commodities

Crude oil has continued the rebound evident in recent weeks boosted by comments from the International Energy Agency that the commodity may have already bottomed out as non-OPEC production is estimated to fall by around 750 000 barrels a day this year. OPEC oil production is reported to have fallen by 90 000 barrels a day in February.

shaun 4

Source: IG

Upcoming week: MPC and results

This week will see the conclusion of the Monetary Policy Committee (MPC) and South African Reserve Bank interest rate announcement, where rates are expected to remain on hold.

The following results are expected:

 

2016/03/14

Adcock Ingram Holdings Ltd: Ex-Dividend ZAR: 0.5

2016/03/14

British American Tobacco: Ex-Dividend GBP: 1.05

2016/03/14

Comair Ltd: Ex-Dividend ZAR: 0.05

 

2016/03/14

DRDGold Ltd.: Ex-Dividend ZAR: 0.12

 

2016/03/14

Distell Group Ltd: Ex-Dividend ZAR: 1.65

 

2016/03/14

Discovery Limited: Ex-Dividend ZAR: 0.855

2016/03/14

JSE Limited: Ex-Dividend ZAR: 5.20

 

2016/03/14

JSE Limited: Ex-Dividend ZAR: 1.05

 

2016/03/14

Massmart Holdings Ltd: Ex-Dividend ZAR: 1.12

2016/03/14

Remgro Ltd: Interim 2016 Results

 

2016/03/14

Sibanye Gold Limited: Ex-Dividend ZAR: 0.9

2016/03/14

Shoprite Holdings Ltd: Ex-Dividend ZAR: 1.56

2016/03/14

Sun International Ltd.: Ex-Dividend ZAR: 0.9

2016/03/17

Astrapak: Ex-Dividend ZAR: 4.39

 

2016/03/17

Argent Industrial Ltd: Ex-Dividend ZAR: 0.09

2016/03/17

Clover Industries Limited: Ex-Dividend ZAR: 24.21

2016/03/17

Capitec Bank Hldgs: Ex-Dividend ZAR: 4.04

2016/03/17

Cashbuild ltd: Ex-Dividend ZAR: 5.13

 

2016/03/17

Grindrod Ltd.: Ex-Dividend ZAR: 0.06

 

2016/03/17

Imperial Holdings Ltd: Ex-Dividend ZAR: 3.70

2016/03/17

Santam Ltd: Ex-Dividend ZAR: 5.28

 

2016/03/17

Truworths International Ltd: Ex-Dividend ZAR: 2.70

 

Upcoming economic data

Date

Time

Region

Event

Previous

15-Mar

2:30pm

USD

Core Retail Sales m/m

0.10%

15-Mar

2:30pm

USD

PPI m/m

0.10%

15-Mar

2:30pm

USD

Retail Sales m/m

0.20%

16-Mar

11:30am

GBP

Average Earnings Index 3m/y

1.90%

16-Mar

11:30am

GBP

Claimant Count Change

-14.8K

16-Mar

2:30pm

GBP

Annual Budget Release

 

16-Mar

2:30pm

USD

Building Permits

1.20M

16-Mar

10:00am

SA

CPI m/m

0.80%

16-Mar

10:00am

SA

CPI y/y

6.20%

16-Mar

1:00am

SA

Retail Sales y/y

 

16-Mar

2:30pm

USD

CPI m/m

0.00%

16-Mar

2:30pm

USD

Core CPI m/m

0.30%

16-Mar

4:30pm

USD

Crude Oil Inventories

3.9M

16-Mar

8:00pm

USD

FOMC Economic Projections

 

16-Mar

8:00pm

USD

FOMC Statement

 

16-Mar

8:00pm

USD

Federal Funds Rate

<0.50%

16-Mar

8:30pm

USD

FOMC Press Conference

 

17-Mar

2:00pm

GBP

Monetary Policy Summary

 

17-Mar

2:00pm

GBP

Official Bank Rate

0.50%

17-Mar

2:30pm

USD

Philly Fed Manufacturing Index

-2.8

17-Mar

2:30pm

USD

Unemployment Claims

 

17-Mar

3:00pm

SA

SARB Rates Decision

0.50%

18-Mar

5:00pm

USD

Prelim UoM Consumer Sentiment

91.7

 

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