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In our continued efforts to give our readers a broad number of views, opinions and information, we provide readers with Peregrine Treasury Services weekly market wrap below.
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Peregrine Treasury Services Weekly Wrap as at 27 September 2019
C’est la vie, Mr President
Donald Trump’s tenure as US president has been nothing short of controversial, with election fraud, sexual harassment, immigration and global trade all making headlines. This time, however, the cloud hanging over his head might yield a little rain. While impeaching Trump is certainly not a new topic of conversation, for the first time a formal impeachment inquiry has been announced instead of just the speculative rumours – or perhaps wishful thinking – that have been on the agenda almost since his election.
We are all well aware that markets and uncertainty do not go well together, a phenomenon which was reinforced this week as risk aversion on the back of the Trump debacle saw a renewed selloff in emerging market assets.
Global politics overwhelm the data this week
It has been a relatively quiet data week, with a few key events, specifically from the United States. While both the US and Iran were afforded the opportunity to speak at the UN General Assembly, the UK Prime Minister Boris Johnson made a rather swift departure following the court ruling that his suspension of parliament was, indeed, unlawful. A key event this week was the US quarterly GDP, which remained solid at 2% growth quarter-on-quarter for Q2. New home sales saw an increase in August, gaining 7.1% month-on-month, comfortably outperforming market expectations of 3.5%. Initial jobless claims also remained within expectations at 213k for the week.
European manufacturing and services PMI for September both worsened to 45.6 and 52 points respectively.
Today will see the release of US durable goods orders, as well as industrial and services sentiment followed by consumer confidence from the EU.
Short week in SA leads to quiet markets
With South Africa celebrating Heritage Day on Tuesday, many locals sought to enjoy a long weekend, leading to a rather quiet and short week on the domestic front. From a political perspective, the landscape remains unchanged, with no events truly warranting a mention, at least for the time being. The threat of a national banking strike was swiftly averted on Thursday, following the granting of an interdict by the courts, bringing much relief to consumers and businesses alike, although Sasbo won’t stop its fight here.
Local PPI released on Thursday declined to 4.5% year-on-year in August, down from the previous 5.4%. With global risk-off sentiment setting the course, the rand came under pressure this week, losing close to 2.5% following the flurry of uncertainties making their way to market. As always, the performance of the rand is largely driven by these global events, with local elements playing a minimal role.
Rand outlook weak
The week ahead will once again leave us at the mercy of the global environment, with markets keeping a keen eye on unfolding events such as the motion to impeach President Trump, calls for Boris Johnson to step down and the ongoing trade dynamic between the US and China. From a data perspective, a few important releases are set to take place locally, including new vehicle sales and the Standard Bank PMI, while we will keep an eye on Chinese and US manufacturing PMI, US unemployment and UK GDP numbers. The rand has moved towards a leg weaker, with the new target level being set at R15.06/$, with a break above this signaling a new bout of weakness that could see the currency target R15.20. The rand starts the day trading at R15.05/$, R16.44/€ and R18.55/£
Donald Trump’s tenure as US president has been nothing short of controversial, with election fraud, sexual harassment, immigration and global trade all making headlines. This time, however, the cloud hanging over his head might yield a little rain. While impeaching Trump is certainly not a new topic of conversation, for the first time a formal impeachment inquiry has been announced instead of just the speculative rumours – or perhaps wishful thinking – that have been on the agenda almost since his election.
We are all well aware that markets and uncertainty do not go well together, a phenomenon which was reinforced this week as risk aversion on the back of the Trump debacle saw a renewed selloff in emerging market assets.
Global politics overwhelm the data this week
It has been a relatively quiet data week, with a few key events, specifically from the United States. While both the US and Iran were afforded the opportunity to speak at the UN General Assembly, the UK Prime Minister Boris Johnson made a rather swift departure following the court ruling that his suspension of parliament was, indeed, unlawful. A key event this week was the US quarterly GDP, which remained solid at 2% growth quarter-on-quarter for Q2. New home sales saw an increase in August, gaining 7.1% month-on-month, comfortably outperforming market expectations of 3.5%. Initial jobless claims also remained within expectations at 213k for the week.
European manufacturing and services PMI for September both worsened to 45.6 and 52 points respectively.
Today will see the release of US durable goods orders, as well as industrial and services sentiment followed by consumer confidence from the EU.
Short week in SA leads to quiet markets
With South Africa celebrating Heritage Day on Tuesday, many locals sought to enjoy a long weekend, leading to a rather quiet and short week on the domestic front. From a political perspective, the landscape remains unchanged, with no events truly warranting a mention, at least for the time being. The threat of a national banking strike was swiftly averted on Thursday, following the granting of an interdict by the courts, bringing much relief to consumers and businesses alike, although Sasbo won’t stop its fight here.
Local PPI released on Thursday declined to 4.5% year-on-year in August, down from the previous 5.4%. With global risk-off sentiment setting the course, the rand came under pressure this week, losing close to 2.5% following the flurry of uncertainties making their way to market. As always, the performance of the rand is largely driven by these global events, with local elements playing a minimal role.
Rand outlook weak
The week ahead will once again leave us at the mercy of the global environment, with markets keeping a keen eye on unfolding events such as the motion to impeach President Trump, calls for Boris Johnson to step down and the ongoing trade dynamic between the US and China. From a data perspective, a few important releases are set to take place locally, including new vehicle sales and the Standard Bank PMI, while we will keep an eye on Chinese and US manufacturing PMI, US unemployment and UK GDP numbers. The rand has moved towards a leg weaker, with the new target level being set at R15.06/$, with a break above this signaling a new bout of weakness that could see the currency target R15.20. The rand starts the day trading at R15.05/$, R16.44/€ and R18.55/£
Advertisement (and yes South Africans can buy from Amazon as they deliver to SA)
Our highlight for the week:
Yesterday we covered the lastest financial results of Capitec (CPI) and their number of active clients is still increasing at a rapid rate. Below an extract from our Capitec financial review.
So the big question is what are Capitec shares actually worth? Do they offer any value at their current price considering the very strong run the shares have had over the last 5 years? Does the growth in Capitec's profits corrospond to the growth in the share price, or is the share price running hot and due for a pull back? Based on Capitec's latest financial results and their prospects our valuation model provides a target (full value) price for Capitec Bank at R1220.
We therefore believe that Capitec Bank's shares is overvalued and we would not recommend long term fundamental or value investors buy into the group's shares at its current price. We suggest looking to enter at least 10% below our target price, which in this case is R1220. A good entry point would therefore be around R1098 a share
Read the full article here
So the big question is what are Capitec shares actually worth? Do they offer any value at their current price considering the very strong run the shares have had over the last 5 years? Does the growth in Capitec's profits corrospond to the growth in the share price, or is the share price running hot and due for a pull back? Based on Capitec's latest financial results and their prospects our valuation model provides a target (full value) price for Capitec Bank at R1220.
We therefore believe that Capitec Bank's shares is overvalued and we would not recommend long term fundamental or value investors buy into the group's shares at its current price. We suggest looking to enter at least 10% below our target price, which in this case is R1220. A good entry point would therefore be around R1098 a share
Read the full article here