Wall Street closed firmer yesterday as positive earnings numbers started pouring in. The release of the Fed minutes yesterday showed that policymakers were debating about whether softer inflation was a new trend or simply due to once-off factors. The stance seems to be that there will be one more rate hike by the end of the year, in line with previous statements and the market’s expectations. The Dollar rally has run its course and the currency depreciated significantly against developed peers. This has also boosted emerging market currencies and equities.
South African News
SA markets continued to climb yesterday, making it a nine-day streak, which is the longest in four years. Banks rallied while a resurgent ZAR placed pressure on resources. There was also weakness from paper and packaging due to disappointing earnings. S&P has said that South Africa’s credit rating could stabilise if there is a return of economic growth. The credit rating agency is looking for growth in excess of 1.0%, which seems a little out of reach at the moment.
Aspen (JSE:APN) is a global supplier and manufacturer of branded and generic pharmaceutical products as well as infant nutritionals and consumer healthcare product. The company has been hit by negative publicity the past year for its pricing models. When the company released its FY2017 the share price had a nice rally on the day and we believe that the company can provide strong earnings growth for 2018. The founder and CEO of Aspen, Stephen Saad, is one of the best businessmen in South Africa, taking it from a local operation to a massive global player.
credit: Graph Provided by Sharenet Advanced Online Charts
Trade APN From 0.3%
The proposed merger between PPC Limited [PPC] and its unlisted rival, AfriSam, could see South Africa’s two largest cement producers combine to fight industry headwinds. The consolidation of players in the cement space has been necessary as output overshadows demand. The merger does not sit well with many of PPC’s shareholders as they believe it potentially limits the upside potential of the company in Africa.
The Day Ahead
Locally we have the release of mining production, which will help form estimates of third quarter GDP growth. Other notable economic data includes industrial production from Europe and producer prices from the US. The weaker Dollar should be positive for the ZAR today, which could place pressure on local market indexes. Asian markets have traded in positive territory this morning and may offset ZAR pressure, so we could well be heading for a tenth session higher.
Key Results Out Today
SA Mining production
EU Industrial production
US Initial jobless claims
Quote of the day
"Tension is who you think you should be, relaxation is who you are."
- Chinese proverb
Quantitative Investment Analyst
Ian Stiglingh is a full time quantitative analyst, responsible for research of equities across all industries. Ian completed his degree in Mathematical Science in 2013 and his Honours degree in Financial Risk Management in 2014, both at the University of Stellenbosch. During his studies, Ian worked as an intern at Old Mutual Actuaries & Consultants as well as J.P. Morgan in Johannesburg, and is currently a CFA candidate
Analyst and Securities Trader
Daniel is a full-time analyst and securities trader, and is responsible for equities research across industries. Although he grew up in a small town in the Klein Karoo, Daniel has always been interested in both locally and internationally traded companies. Daniel has been actively investing and trading on the JSE and other global exchanges since starting his Bcom Investments Degree at the University of Stellenbosch, which he completed in 2014 . During his studies, Daniel worked as an intern at Kruger International in Johannesburg in 2015, gaining valuable experience from Hein and Mia Kruger. He is currently a CFA candidate.