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Port Elizabeth - The first trading week of 2015 delivered no surprises, with all stock markets around the globe closed last Thursday to celebrate New Year’s day. In addition, most stock exchanges opted for shorter trading sessions on another day or two during the week.
Volumes on the JSE were low with shares not really showing any clear direction. Investors and fund managers will most likely only get into the swing of things during the next week, or maybe only the week thereafter.
It looks as if extra hard work will be needed this year to achieve good returns on the market. Commodity shares seem to be bombed out after decreases of up to 50% last year, but still without any indications of recovery. Lower demand for metals and minerals not only lowered prices, but also sales volumes.
Anglo American Platinum [JSE:AMS] already said this week that earnings would be some 20% lower in its financial year to end-2014, while gold mines and other commodity producers have already published quite bad results for the third quarter of last year.
The rand's decline to a low of R11.70 per dollar early last week will do little to bail out our mining sector: commodity prices feel hard and costs are set to increase even further in the coming year with expected strikes and high wage demands, while electricity is also set to add to costs due to tariff hikes and power disruptions.
The rest of the market is also set for a difficult year. Market commentators and economists are generally expecting another increase in interest rates before the middle of the year, which will impact on consumer spending and companies’ financing costs.
Lower sales volumes, the higher cost of imported goods due to the weak rand and a bit of consumer caution will result in lower margins and lower profits.
Meanwhile, the price to earnings ratio seems to be high – at an average of around 18 times compared to the market’s long-term average of between 11 and 12 times. A PE ratio this high usually signals strong earnings growth, which most market followers are currently not expecting.
The week ahead
Retail chains will probably start to tell us how things went over the holiday season with official figures only expected towards the end of the month. Everybody will be watching the exchange rate closely to see if the rand will break through R12 to the dollar or, expressed alternatively, if the value of the rand will fall to a lousy $0.08.
Yes, at R12 to the dollar the rand is worth only 8c in the US. You will need to exchange nearly R18 into dollar to buy a $1.49 cup of coffee at MacDonald’s in New York City.
Towards the end of the month we can expect the usual inflation figures and the first trading updates from companies with either December or June year-ends.
Volumes on the JSE were low with shares not really showing any clear direction. Investors and fund managers will most likely only get into the swing of things during the next week, or maybe only the week thereafter.
It looks as if extra hard work will be needed this year to achieve good returns on the market. Commodity shares seem to be bombed out after decreases of up to 50% last year, but still without any indications of recovery. Lower demand for metals and minerals not only lowered prices, but also sales volumes.
Anglo American Platinum [JSE:AMS] already said this week that earnings would be some 20% lower in its financial year to end-2014, while gold mines and other commodity producers have already published quite bad results for the third quarter of last year.
The rand's decline to a low of R11.70 per dollar early last week will do little to bail out our mining sector: commodity prices feel hard and costs are set to increase even further in the coming year with expected strikes and high wage demands, while electricity is also set to add to costs due to tariff hikes and power disruptions.
The rest of the market is also set for a difficult year. Market commentators and economists are generally expecting another increase in interest rates before the middle of the year, which will impact on consumer spending and companies’ financing costs.
Lower sales volumes, the higher cost of imported goods due to the weak rand and a bit of consumer caution will result in lower margins and lower profits.
Meanwhile, the price to earnings ratio seems to be high – at an average of around 18 times compared to the market’s long-term average of between 11 and 12 times. A PE ratio this high usually signals strong earnings growth, which most market followers are currently not expecting.
The week ahead
Retail chains will probably start to tell us how things went over the holiday season with official figures only expected towards the end of the month. Everybody will be watching the exchange rate closely to see if the rand will break through R12 to the dollar or, expressed alternatively, if the value of the rand will fall to a lousy $0.08.
Yes, at R12 to the dollar the rand is worth only 8c in the US. You will need to exchange nearly R18 into dollar to buy a $1.49 cup of coffee at MacDonald’s in New York City.
Towards the end of the month we can expect the usual inflation figures and the first trading updates from companies with either December or June year-ends.
