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The rand has started to breathe a sigh of relief

A look at last week and this week’s market, economic and company news.

Last week saw minutes from the US Federal Open Market Committee (FOMC) meeting as well as the conclusion to the local Monetary Policy Committee (MPC) meeting among the most significant data points to steer our domestic bourse.

International data

Minutes from the latest FOMC meeting in the US suggested that a rate increase in June 2016 was a distinct possibility should labour conditions continue to strengthen and economic growth persist within the region.

In the US Consumer Price Index data (CPI) showed a month on month increase in inflation of 0.4% (est. 0.2% m/m).

Global Indices

Local data

The South African Reserve Bank (Sarb) kept lending rates on hold at the conclusion of the Monetary Policy Committee (MPC) meeting. The Sarb expects inflation to average at 6.7% in 2016 and return within the 3% to 6% targeted band in Q3 2017. GDP growth for 2016 has been revised to 0.6% from 0.8% previously.

Some of the other key data points locally were as follows:

  • The headline CPI annual inflation rate in April 2016 was recorded at 6.2%
  • Retail trade sales increased by 2.8% year-on-year in March 2016
  • Wholesale trade sales increased by 1.8% in March 2016 compared with March 2015
  • Motor trade sales decreased by 2.8% year-on-year in March 2016

Commodities

Strength in the US dollar has kept commodity prices under pressure for most of last week as the probability of an interest rate hike in June 2016 appears to have increased over the period. A larger than expected increase in m/m inflation being reported as well as hawkish comments, from US Fed officials, were among the motivations for the move.

Commodities

While a strengthening dollar has tempered moves on crude oil prices, the commodity has once again been the relative outperformer in the week gone by. A series of supply outages being reported out of Nigeria, Canada and Libya having catalysed prices to near six month highs.

The rand

The rand along with its emerging market peers have fallen victim to strengthening frontier market currencies this week. While hawkish comments from US Fed officials have equated to renewed dollar strength, the British pound has rallied sharply as recent “Brexit” polls have shifted in favour of Britain remaining part of the European Union (EU).

ZAR

The currency has however started to breathe a sigh of relief in the new week, following news that local finance minister, Pravin Gordhan, is not a suspect in the Hawks’ investigation into the South African Revenue Service “rogue unit” investigation.

Companies

Equity movements on our local exchange were mixed over the course of the week, with gold counters exaggerating declines in the underlying price of the precious metal, while large cap industrial rand hedges such as SABMiller and Naspers helped to buoy the index.

JSE Sectors

A brief summary of corporate news released over the week are as follows:

Richemont FY 2016 results showed operating profit to have decreased by 23% due to a non-reoccurring property disposal in the prior year’s comparative results.

The Investec Group reported diluted headline earnings per share to have increased by 8.3% in its FY 2016 results.

Anglo American Platinum is said to be in talks with two South African entities relating to the possible sale of some of the group’s higher cost mines.

The Spar Group reported diluted headline earnings per share to have increased by 5.4% in the interim reporting period.

Coronation Fund Managers Ltd saw headline earnings per share decrease by 6.9% in the interim reporting period.

Netcare Ltd interim results revealed headline earnings per share to have increased by 10.9% from the prior year’s comparative interim period.

Barloworld Ltd interim results showed revenue to have increased by 4.2%, although headline earnings per share fell by 8.4% against the prior year’s comparative six month period.

Lonmin Plc interim results showed the group to have substantially reduced its loss per share from 164.60c to 1.80c.

Astral Foods Ltd interim results saw headline earnings per share decrease by 22.6% from the prior year’s comparative interim period.

The Lewis Group expects headline earnings per share for FY 2016 to be between 24% and 29% lower.

Tencent Holdings of which Naspers remains a major shareholder, reported total revenue and operating profit for Q1 2016 to have both increased by 43% y/y.

Upcoming corporate data

2016/05/23

DRD: Ex Dividend 0.38 ZAR

2016/05/23

Illovo Sugar Ltd: Q4 2016 Earnings Release

2016/05/23

Pioneer Food Group Ltd: Q2 2016 Earnings Release

2016/05/23

Quantum Foods Holdings Ltd: Q2 2016 Earnings Release

2016/05/23

Rhodes Food Group Holdings Ltd: Q2 2016 Earnings Release

2016/05/23

Shoprite Holdings Ltd: Financial Update discussion

2016/05/24

Reunert Ltd: Q2 2016 Earnings Release

2016/05/24

Nampak Ltd: Q2 2016 Earnings Release

2016/05/24

Reunert Ltd: Q2 2016 Earnings Release

2016/05/25

Lewis Group Ltd: Q4 2016 Earnings Release

2016/05/25

Peregrine Holdings Ltd: Q1 2016 Earnings Release

2016/05/26

Foschini Group Ltd: Q4 2016 Earnings Release

Upcoming economic data

24-May

 11:00am

EUR

German ZEW Economic Sentiment

11.2

25-May

10:00am

EUR

German Ifo Business Climate

106.6

25-May

4:30pm

USD

Crude Oil Inventories

1.3M

26-May

10:30am

GBP

Second Estimate GDP q/q

0.40%

26-May

2:30pm

USD

Core Durable Goods Orders m/m

-0.20%

26-May

2:30pm

USD

Unemployment Claims

278K

26-May

11:30am

ZAR

PPI m/m

0.70%

26-May

11:30am

ZAR

PPI y/y

7.06%

27-May

2:30pm

USD

Prelim GDP q/q

0.50%

Shaun Murison is a senior analyst at IG South Africa.

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