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By Ian Stiglingh on 19 May 2017

World News

Brazil has fallen back into political turmoil after the new President was accused of bribery. The news caused markets in Brazil to tailspin and the ripple effect was felt in Emerging Markets. Wall Street rebounded from the large declines on Wednesday thanks to a positive technology sector. Economic data showed an unexpected decline in initial jobless claims, affirming the strength in the US labour market. UK markets fell on a strong Pound, helped by a surge in retail sales.

 

South African News

SA markets bucked the global trend by rallying yesterday, partly due to a weaker ZAR. The currency fell victim to Brazil’s politics and support large dual listed companies and resources. The large currency move just shows how vulnerable the ZAR can be, but there is a bias for a rebound in the ZAT this morning. Trading on the JSE saw the most volumes since the day following President Zuma’s cabinet reshuffle.

 

Company News – Cheyne

Steinhoff International Holdings

The recent announcement by Steinhoff [SNH] to separately list the African assets, re-iterates our buy recommendation for the longer-term investor. We believe the separation will unlock value for shareholders. Importantly, it does not appear there will be shareholder dilution and the listed company will raise equity and debt, allowing it to pursue strategic acquisitions. Developed market investors are likely to find the share more attractive given the removal of African currency risk. SNH will retain a minority interest in the new entity which would likely benefit from the premium that Africa retail trades at over the SNH Frankfurt listing.

 

The Day Ahead

Volatility has increased in the market and today seems like it could be a similar story as the market looks unsure of which direction to follow. There has been upward momentum, but at the current levels of the market, many are starting to anticipate a correction. Should the ZAR hold firm we could see a decline into the weekend while further ZAR weakness should provide a boost. The data calendar is very much empty today with only EU current account data having small potential to change sentiment in the Euro.

 

Key Results Out Today

EU Current account

 

Quote of the day

“When the President does it, that means that it’s not illegal.”

-          Richard M. Nixon