Publications
Partners
Port Elizabeth - It is probably too early to start and advertise shares at end-of-the-crisis bargain prices, but astute investors are probably already watching their favourite shares after the last few days of declines.
It makes good sense to pay just more than a percent less for something like BHP Billiton [JSE:BIL] than a week ago, or Sasol [JSE:SOL] that is now 3.% cheaper and Implats [JSE:IMP] which you can buy at 8.5% less than a week ago.
Most of the changes in the last week is bound to benefit - rather than disadvantage - these companies.
The biggest event in the financial world the past week was that investors took fright when the US Federal Reserve said thay are indeed going to taper down the repurchase of bonds by another $10bn as they planned all along.
Suddenly, emerging markets were too risky and emerging countries' currencies crumbled.
But earnings at the international commodity conglomerate Billiton increased in rand terms, as well as those of Sasol and Implats.
In fact, earnings of SA commodity producers are far more sensitive to changes in the currency than to changes in commodity prices.
The rand (seemingly solidly) stuck above R11 per dollar is good news.
It is, therefore, not surprising that a lot of commodity shares held up quite nicely in the recent market turmoil.
Anglo American [JSE:AGL] increased 3.2% compared to a week ago, fuelled by a trading update that showed that production in several of its divisions is increasing and in some instances higher than ever before.
Somebody is obviuosly buying the stuff, indicating that the world economy is not doing that badly.
Another commodity share to add to the bargain list might be ArcMittal [JSE:ACL] which fell 6.7% the past week, while SABMiller [JSE:SAB] also benefits from a weaker rand. It was down 5.7% the previous week.
The week ahead
The second important event the past week was the supposedly unexpected interest rate increase by tghe SA Reserve Bank.
Most economists' models would have shown an increase in interest rates was on the cards - and the only reason it was not expected was probably because personal sentiment overruled the obvious.
Our Reserve Bank governor Gill Marcus really had not choice.
Consumer inflation has been at the upper end of the inflation target and above for monhts, while the numbers eventually caught up with reality with regards to production prices.
The latest production price index showed that prices at the factory gate increased by 6.5% in December.
Higher interest rates immediately hit retail and other consumer-sensitive shares and will probably contunue to do so this week.
Mr Price [JSE:MPC] fell 8%, Lewis Stores [JSE:LEW] declined 12% and Woolworths [JSE:WHL] fell 11.6%.
It is simple: Higher interest rates immediately cut disposable income and the number of trips to the shops.
It is interesting that so-called defensive stocks, food retailers and pharmaceuticals also declined.
Banks are bound to suffer as applications for loans decrease and bad debt increases in line with higher interest rates.
Maybe this will not be as a result of this 50 basis point hike, but after the next few "unexpected" hikes.
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at Nelson Mandela Metropolitan University.
It makes good sense to pay just more than a percent less for something like BHP Billiton [JSE:BIL] than a week ago, or Sasol [JSE:SOL] that is now 3.% cheaper and Implats [JSE:IMP] which you can buy at 8.5% less than a week ago.
Most of the changes in the last week is bound to benefit - rather than disadvantage - these companies.
The biggest event in the financial world the past week was that investors took fright when the US Federal Reserve said thay are indeed going to taper down the repurchase of bonds by another $10bn as they planned all along.
Suddenly, emerging markets were too risky and emerging countries' currencies crumbled.
But earnings at the international commodity conglomerate Billiton increased in rand terms, as well as those of Sasol and Implats.
In fact, earnings of SA commodity producers are far more sensitive to changes in the currency than to changes in commodity prices.
The rand (seemingly solidly) stuck above R11 per dollar is good news.
It is, therefore, not surprising that a lot of commodity shares held up quite nicely in the recent market turmoil.
Anglo American [JSE:AGL] increased 3.2% compared to a week ago, fuelled by a trading update that showed that production in several of its divisions is increasing and in some instances higher than ever before.
Somebody is obviuosly buying the stuff, indicating that the world economy is not doing that badly.
Another commodity share to add to the bargain list might be ArcMittal [JSE:ACL] which fell 6.7% the past week, while SABMiller [JSE:SAB] also benefits from a weaker rand. It was down 5.7% the previous week.
The week ahead
The second important event the past week was the supposedly unexpected interest rate increase by tghe SA Reserve Bank.
Most economists' models would have shown an increase in interest rates was on the cards - and the only reason it was not expected was probably because personal sentiment overruled the obvious.
Our Reserve Bank governor Gill Marcus really had not choice.
Consumer inflation has been at the upper end of the inflation target and above for monhts, while the numbers eventually caught up with reality with regards to production prices.
The latest production price index showed that prices at the factory gate increased by 6.5% in December.
Higher interest rates immediately hit retail and other consumer-sensitive shares and will probably contunue to do so this week.
Mr Price [JSE:MPC] fell 8%, Lewis Stores [JSE:LEW] declined 12% and Woolworths [JSE:WHL] fell 11.6%.
It is simple: Higher interest rates immediately cut disposable income and the number of trips to the shops.
It is interesting that so-called defensive stocks, food retailers and pharmaceuticals also declined.
Banks are bound to suffer as applications for loans decrease and bad debt increases in line with higher interest rates.
Maybe this will not be as a result of this 50 basis point hike, but after the next few "unexpected" hikes.
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at Nelson Mandela Metropolitan University.
