Date published -2023-08-22

(This is a very shortened version highlighting excerpts of our full report which is available for our paid subscribers)

Last week, the macroeconomic data and newsflow was firmly on China and it caused quite the stir!

News flow on China over the course of the last week was dominated by rising concerns around municipal debt as well as the real estate sector. Evergrande returned to the headlines as they filed for US bankruptcy. Chinese industrial production in July slowed to 3.7%, correlating with slower trade data in the preceding week. Chinese retail sales for July slumped to 2.5%. The National Bureau of statistics in China also announced that they will be suspending the release of youth unemployment indicating the need to optimize and improve their labour force surveys and statistics. This plethora of economic data was also accompanied by a marginal decline in the policy rate from 2.65% to 2.5%.

In the US, better than expected economic data has given rise to concerns that the US Federal Reserve may not reverse hiking cycle as aggressively as previously anticipated. Retail sales for July were up 0.7% month on month, a fourth consecutive month of gains and ahead of market expectations. The release of the latest FOMC minutes indicated that the Fed continued to see significant upside risks to inflation which could require a further tightening in monetary policy. All eyes are on Jerome Powell's 'summer camp' at Jackson Hole, the event that will have the most material bearing on markets this week. 

South African macroeconomic data painted a less rosy picture. Retail sales fell by 0.9% year on year in June worse than market expectations.  and it was also the 7th consecutive month of declines. Unemployment remained elevated at 32.6% in Q2 2023.

Also likely to grab some attention will be South Africa hosting the BRICS summit. With heads of state from the BRICS (excluding Russia) likely attending in person, this will be a key event to watch for a further shift toward the ‘Global South’ narrative. While optics and headlines may have some short term bearing this is likley more a longer term trend to watch. We also have the release of SA inflation data for July.

Our feature this week is about the importance of cultivating patience as a prerequisite for sound investment decisions. 

In the fast-paced world of the financial markets, the adrenaline can often overtake the analytical mind, causing a trader or investor to act impulsively. The allure of quick profits or the fear of impending losses can be intoxicating. Yet, those who have navigated these choppy waters with consistent success often attribute their triumphs to a seemingly simple virtue: patience.

While the financial markets might seem like a space where speed is everything, it’s often the tortoise, not the hare, that wins the race. Patience, combined with knowledge and a sound strategy, can be the most potent tool in an investor’s arsenal. Embracing it can lead to more informed decisions, reduced stress, and, ultimately, greater financial success.

Market update:

Losses on global markets last week were widespread and across asset classes. The S&P 500, Dow Jones, and Nasdaq all ended the week over 2% lower. The yield on the US 10-year treasury rose to 4.3% last week, pressuring bonds while oil and metals prices also ended the week lower.

The bulk of earnings releases in the US last week were positive with most companies beating both earnings and revenue estimates. Major retailers like Walmart (-2.2%) and Home Depot (-1.4%) posted better than expected results but still came under selling pressure. Ironically, Target (-0.6%) outperformed its peers despite missing on revenue estimates.

South African markets were not spared the sell off last week with losses across all major indices. The overall market ended around 5% lower with the resources sector bearing the brunt of the sell off. While this was largely related to the overall market sentiment, there was some significant news flow in the sector.

Sibanye Stillwater (-10%) , Impala Platinum (-16%) ,Goldfields (-11%) ,DRD Gold (-7.5%), Exxaro (-7%) , Standard Bank (-2%) and Absa (-3.2%) all released numbers. Our full report contains the key details. In some positive news, telecoms giant MTN announced that global payments giant, MasterCard will be taking a minority stake in its fintech business, valuing this part of MTN at around $5.2 billion. This is part of a wider strategy by MTN to include minority partners in several of its businesses including its fibre, with a view of potentially listing these separately in time. This overshadowed the financial results which posted a modest 7.1% rise in headline earnings and continuing challenges at some of its African operations.

This week, we will watch for results from BHP, Sasol and Grindrod domestically. In the US, Nvidia and Intuit are among the larger names reporting.

This week we keep 1 short position open but tighten our stop loss to protect profits in the event of a short term reversal. We also consider taking profit on our commodity position although longer term traders may hold through any short term correction. We provide full detail on these updated views and trades to our paid subscribers!

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