ARTICLES

Market Overview

Over the past few weeks there have been a number of interesting developments. There have been more revelations coming out of the leaked Gupta e-mails which show just how far state capture has gone, but as yet there is no action from the government or even an official position on this matter. It is as if their attitude is that if they ignore it for long enough it will disappear. The Zuma camp is struggling to progress any of their radical populist agendas because of strong opposition from within the ANC and without.

The political dilemma is best evaluated by watching the progress of the rand against the US dollar:

Rand Dollar - Chart by ShareFriend Pro

The above chart shows that the effect of the political turmoil in South Africa has been to temporarily arrest the strengthening trend in the rand rather than to halt it. The international currency traders who dominate this market appear to be positive about the long-term outcome, which can only meanthat they see positive regime change in the not-too-distant future. It is almost as if the Zuma camp, like the Trump camp, is becoming less and less relevant to the progress of the economy and the markets. It is as if the forces which are now playing out, and which were set in motion long before the current political incumbents came into office, are linked together and are set to play themselves out more-or-less irrespective of the shenanigans of the current unfortunate leadership. The JSE is showing clear signs of following other world markets into new record territory. The JSE Financial and Industrial index, which has been trapped in a sideways market for more than two years looks ready to break upwards. Consider the chart:

JSE Overall Index - Chart by ShareFriend Pro

A strong upside break would herald further gains and perhaps a"catching up" with other world markets. We have seen an increasing number of new listings which suggests that we may be heading into some sort of listings boom. Most notable among these are:

• Dischem, which we have written about in previous articles:

Dischem Pharmacies (DCP) - Chart by ShareFriend Pro

• And Long 4 Life, which we have written about in a previous article:

Long 4 Life (L4L) - Chart by ShareFriend Pro

Both are doing very well and show promise of continued steady growth. Underlying these developments is a steady rise in the S&P500 index which has made a series of new record highs. We believe that the S&P will continue to perform well, driven mainly by improving corporate profits in an economy that is now growing strongly as confidence levels return and consumers and businesses begin spending some of the cash they have been hoarding since the sub-prime crisis in 2007/8. Consider the chart:

S&P500 Index - Chart by ShareFriend Pro

Here you can see the S&P500 index climbing steadily between its two long-term channel lines. This index is driving the progress of all markets around the world, including the JSE. It is approaching its upper channel line, which implies that some sort of pull-back or correction may be imminent. You should bear that in mind, as an investor and recognise it, when it happens, for what it is - a healthy correction in a powerful long-term bull trend.  

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PDSNET ARTICLES - JULY 2017

Market Overview

Over the past few weeks there have been a number of interesting developments. There have been more revelations coming out of the leaked Gupta e-mails which show just how far state capture has gone, but as yet there is no action from the government or even an official position on this matter. It is as if their attitude is that if they ignore it for long enough it will disappear. The Zuma camp is struggling to progress any of their

The Disconnect

An interesting disconnect is going on in South Africa. On the one hand, you have economists who are almost universally negative, reducing their estimates of GDP growth and pointing to falling consumer confidence and lower production. On the other hand, you have rising share prices, which imply higher company profits in the future, and that implies improved consumer spending and

The Rand

The currency of a country is like the shares of a listed company. If the company is expected to do well and make profits, then its shares will go up and vice versa. The same applies to a currency. If the country is perceived as being well-managed and doing well, then its currency will strengthen against other currencies and vice versa.
The rand is unusual among emerging market

The JSE�s Island Formation

With all the turbulence on the South African political scene it has been difficult to discern the direction of the JSE over the past year. The JSE Overall index has moved sideways while the markets of the world, and especially Wall Street have been making new highs.
Consider the chart:

JSE Overall Index October 2016 to July