Daily Market Commentary: PMK Group

      Daily Market Commentary: PMK Group

      Dare we say it?

      After a record-breaking start to the week (not the good kind), the local unit staged a classic rope-a-dope comeback yesterday, strengthening just over 3% against the greenback. While it is far too early to say that the Rand is on the comeback trail, it seems (for now) that risk sentiment has shifted as news of the slowing of new Coronavirus infections in Asia and Europe buoyed markets.

      The Reserve Bank presented its bi-annual monetary policy review yesterday, painting a dismal picture of the economic outlook for the country. The SARB cut its growth forecasts for 2020 and 2021 due to the impact of the Covid-19 pandemic and the current lockdown. The economy could contract by as much as 4.0% this year and is unlikely to grow by more than 1.0% in 2021. The central bank further expects up to 370 000 jobs to be lost and 1 600 business insolvencies.

      The fact of the matter is that a global recession is upon us, and while we are not sure how significant the potential fall-out could be, the uncertainty in the markets will weigh heavily on the rand and volatility is only one bad headline away.

      The brisk upside in US equities in yesterday evening’s session, improved tonality in the Asian region and short term technical considerations should create modest support for the JSE at the commencement of today’s session. The momentum on global indices and the domestic market needs to be contextualized against the overall structural deterioration in medium term charts a trend backdrop which is highly suggestive of additional residual selling pressure ultimately developing. Countertrend rallies which occur during periods of trend deterioration are notoriously challenging to predict as they include elements such as technical factors, short term covering and substantial (almost manic) reversals in investor sentiment. In our assessment the available strength should be used as an opportunity to lock in profits on short term trading positions which have enjoyed exceptional upside in recent sessions. Trading exposure to the gold board should be retained.

      References: PMK investment committee, Exchange 4 free , Momentum Investment Consultants, Momentum securities

      07 Tuesday 2020

      USD/ZAR 18.62 GBP/ZAR 22.88 EUR/ZAR 20.20 AUD/ZAR 11.46 NZD/ZAR 11.16 CHF/ZAR 19.11 SGD/ZAR 13.03

      All rates quoted are the interbank rates at time of publishing and shown for indicative purposes only. It is important to note that foreign exchange rates fluctuate and that the rates will vary depending on the amount and product purchased and sold.


      SARB cuts GDP Growth forecast

      The SARB forecast a 0.2% contraction in GDP prior to the lockdown but is now looking at - 4% for 2020. It has indicated, however, that there is more scope for policy support.

      Ace Magashule looks at Pensions grab

      The ANC Secretary General, together with Cosatu’s Bheki Ntshalintshali and the SACP’s Solly Mapaila, have said SA must on no account seek loans from the IMF and should look to other sources including pension funds. There has also been talk that SA could get a loan from the BRICS bank.

      Is the covid-19 tide really turning?

      The FT’s Mike Mackenzie quotes Capital Economics as saying a lasting rebound in global equities requires signs of the virus being contained in much of the world and, on that score, “ the latest data have only been moving in the right direction for a few days.”

      Top Execs Share the Pain

      It turns out that Woolies Board and management’s gesture yesterday is part of a growing international trend. Years of investors and journos criticising excessive packages may have helped. The FT reports that more than three dozen British companies and 70 US companies have cut their executives’ salaries while there have been a wide variety of voluntary actions including donations to charities or, in the UK, to the NHS. It remains, however, to be seen whether the executive pay consultants, who were nicknamed "Ratchet, Ratchet and Bingo" by Warren Buffet, change their practices after the crisis.

      References: PMK investment committee, Exchange 4 free , Momentum Investment Consultants, Momentum securities