Capio Capital

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24/11/2015

Capio Capital Market Overview and Trade Ideas

In Asia this morning the slump in commodity prices is continuing with copper and nickel trading at their lowest levels in 6 years. The Nikkei resumed trading after yesterday’s bank holiday and was down just under a tenth of a percent with utilities trading lower while pharmaceuticals gained. The Hang Seng lost 8 tenths of a percent led by weaker financials while personal computer manufacturer Lenovo gained over 3%. Data showed that exports from Japan increased 12% in October as a result of the devaluation of the currency in August. The Shanghai Composite traded just under a percent lower with the lower commodity prices weighing on mining stocks and in Australia the ASX is down 3 tenths of a percent with BHP Billiton trading at a 7-year low.

European markets ended lower with commodity stocks weighing on markets. Both the FTSE and the CAC lost just less than half a percent. Markets in London saw travel and leisure company Playtech Plc. fall 9% after calling off an acquisition and ArcelorMittal in France lost over 4% as metal prices waned. The DAX fell a quarter of a percent. Credit Suisse lost 4% after it completed a capital raising by issuing 58m new shares and Energy utility RWE fell to its lowest level in 7 years after their CEO said that the company is having issues finding funding for future growth. Other news included US drugs firm Pfizer and Irish based Allergan agreed on the largest Healthcare merger in history after Pfizer agreed to acquire the Irish firm for a record $160bn deal. Allergan dropped over 3%.

A relatively choppy trading day eventually saw U.S. markets close marginally lower as both the DOW and S&P lost 0.15%. Pfizer lost 3%, Hilary Clinton attacked the pharmaceutical’s plan to move its tax address to Ireland and stated that she would release a proposal in the next couple of weeks to deter similar deals in the future. Electronic Arts Inc. dropped 5% as sales of the Star Wars game were weaker than expected and GameStop fell close to 7% on weaker than expected earnings and outlook. On the upside Tyson Foods increased its dividend and raised its profit outlook helping the stock gain close to 10%. Data released by the National Association of Realtors showed that existing home sales fell 3.4% in October after gaining 4.7% in September.

After opening lower and losing over a percent in the morning session the JSE managed pull back losing just a tenth of a percent and closing lower for the first time in 3 trading sessions. Mining and resource stocks were hit hard; Glencore lost over 7% while Harmony Gold, Anglo American and Billiton all lost over 3%. The market did not respond well to Netcare’s results. The Hospital operator said that adjusted headline earnings grew 12.6% for the year ended September compared to the same period last year while revenue rose 6.1%. The share closed 3.8% lower. Vodacom advised that it had asked the competition tribunal hearing to be postponed as it was talking to Neotel about restructuring the proposed takeover of the internet provider which could impact the extent of the approval being sought. The rand moved back above R14 to the dollar, value traded was R17.5bn

Trading Ideas

1) Long APN from R310, we believe Aspen has great long term value at current levels.
2) Long MTN from R132, we believe MTN is a good long term buy at these levels and that the fine imposed by Nigerian regulatory authorities could be reduced at any time.
3) Long FSR from R49, the banking sector has been hit hard of late, and we believe there is some value in this sector with FSR our preferred stock.
4) Long ZED from R6.97, with Pioneer upping its dividend by 52%, we believe there will be some buying in Zeder as they own 70% of Pioneer Food Group.

17/11/2015

Capio Capital Market Overview and Trade Ideas

Asian markets are taking the lead from a positive close on Wall Street and are trading higher this morning. The MSCI Asian Pacific is up +0.6%. The Australian market is supported by a bounce in commodity and energy prices, BHP Billiton and South 32 are up -0.7% and +1.6% respectively. The Japanese market is boosted by a weaker yen lifting heavyweight exported and the index. Tencent is currently up +3% in Hong Kong this morning.

US markets closed well in the black despite dampened European markets after the Paris terror attacks. The S&P500 gained +1.5%, the Dow climbed +1.4% and the Nasdaq added +1.2%. Manufacturing in the New York State rose marginally for November to -10.7 after a reading of -11.36 the previous month. Marriott International and Starwood Hotels & Resorts concluded a merger deal worth $12 billion to create the world’s biggest hotel group. Liberty Global retreated after completing a take-over of Cable and Wireless for $5 billion.

The major European markets closed Monday’s trading session positively with France bucking the trend after their terror attacks. The FTSE gained +0.5%, the Dax added +0.05% and the Cac dropped -0.08%. Eurozone inflation for October came in better than expected and turned positive. The initial weakness was on the back of the Paris Attacks with leisure and travel stocks under the most pressure. Markets recovered, lifted by energy stocks. In Paris, Air France tanked -6% and hotel group Accor plunged -5%. In Frankfurt, airliner Lufthansa fell -1.6% and in London Ryanair fell -1%

The Top 40 recouped some of Friday’s losses and closed up +1.2% with contributions from all major sectors. Resources jumped +1% led by African Rainbow Minerals, up +5%. Financials added +0.5%, assisted by a +3.5% move by Sanlam and Industrials rose +0.8% led by Telkom (+7%) and Tiger Brands (+5.5%). The deadline for MTN to pay the $5.2 billion was yesterday which has now been postponed. Telkom surged after their interim results and Tiger Brand jumped after a cautionary announcement advising no further financial support to their Nigerian investment. The value traded was R18 billion and the rand was hovering around 14.36 to the US dollar at the close.

Trading Ideas

1) Long APN from R301, we believe Aspen has great long term value at current levels.
2) Day Trade: Long SHF from R81, the stock has strong support at these levels and represents a good opportunity to profit from a day trade.
3) Long MTN from R142, we believe MTN is a good long term buy at these levels and that the fine imposed by Nigerian regulatory authorities could be reduced at any time.
4) Long FSR from R47, the banking sector has been hit hard of late, and we believe there is some value in this sector with FSR our preferred stock.

12/11/2015

Capio Capital Market Overview and Trade Ideas

Asian markets are trading mostly higher this morning. Japanese stocks were little changed in a light trading session with buying seen in defensive domestic shares after data showed Japan’s core machinery orders increased for the first time in four months. Hong Kong shares were lifted by a further 1.5% gain in Tencent, while Chines stocks were mixed with some profit taking seen in the financial sector. Australian stocks recovered from early morning losses after employment data beat expectations buy energy counters were under pressure due to weaker oil prices. BHP Billiton is down over 1% and Rio Tinto is up 0.14%.

European markets ended the day higher lifted by some strong corporate reports. In London, SAB Plc added 1.86%, after AB InBev launched its bid for SAB and credit data company, Experian gained more 2.3% after releasing better than expected results. On the downside, Sainsbury slumped 7.08% after reporting a drop in first half profits. In Germany, consumer goods group Henkel gained more than 7% after their results beat estimates and Danish brewer Carlsberg climbed over 6% after announcing plans to cut 2000 jobs in an effort to improve profitability. French media company, Vivendi fell 7% after reporting lower third quarter operating profit after its music and pay –television units battled with competition and subscriber losses.

US markets closed modestly lower last night, weighed by a drop in oil prices and disappointing results from Macy’s. Macy’s tumbled 13.99% after same store sales unexpectedly fell in the third quarter and they cut their sales and profit forecast for the holiday quarter ending in January. JC Penny lost 1.84% despite reporting a 6.4% increase in same store sales. The S&P energy sector dipped 1.9% after a 3% drop in oil prices and on growing concerns about US stockpiles.

The Top 40 ended a four day losing streak to end the day up 0.14% at 47265.80. Mining stocks were again the laggards, with Kumba Iron Ore one of the worst performers, falling a further 10.30%, while Exxaro added 1.87% following an upbeat trading statement. The Spar Group Ltd fell 3.01% after their results disappointed and SAB Miller plc gained 1.72% to close at a record high of R881.94 after Anheuser-Busch InBev NV released a detailed formal $104biillion offer for the brewer. The value traded at the close was R17.3bn with the rand was trading at R14.18 vs the dollar.

Trading Ideas

1) Long APN from R310, we believe Aspen has great long term value at current levels.
2) Day Trade: Long SHF from R83.60, the stock has strong support at these levels and represents a good opportunity to profit from a day trade.
3) Long MTN from R150, we believe MTN is a good long term buy at these levels.

10/11/2015

Capio Capital Market Overview and Trade Ideas

Asian markets tracked a weak close on Wall Street and a global sell off. The MSCI Asian Pacific index is down -0.4%. The Australian ASX200 extended Monday’s losses falling -0.4% led lower by banking stocks. Asciano, a port and rail operator, jumped +3% after receiving a takeover bid worth A$9 billion from a consortium including logistics company Qube holdings. The Japanese market snapped a 4 day winning streak and currently down -0.1%. In Hong Kong, Tencent is currently down -1.6% ahead of their 3Q results expect later today. Markets in Malaysia and Singapore are closed for their Deepavali holiday.

Chinese trade data kept European markets under pressure and a weak open on Wall Street pulled European markets further to close at the lows of the day. The FTSE lost -0.9%, the Dax shred -1.6% and the Cac retreated -1.5%. Eurozone finance ministers were not satisfied with some Greek reforms and refused to release the next tranche of 2 billion euros. Portugal vote today and the Socialist party are leading polls to win the election. In Frankfurt, Continental tanked -5% after releasing their results. In Paris, the French government is against merger talks between Renault and Nissan which caused Renault to fall -3.6%.

The Dow, S&P500 and Nasdaq dropped -1% as traders still seemed to react to the strong jobs report last Friday and the real possibility of a December rate hike. The comments by Boston Fed president, Eric Rosengren about “now is the time” to raise rates added further pressure to the market. This pull back has prevented the market from reaching highs made in July. The weakness on Wall Street was broad based and only the gold, railroad and biotech sectors showed some strength. 90% of the S&P500 companies have reported 3Q results and only 44% have beaten sales estimates while 73% have had an earnings surprise.

Resources gained 0.8%; financials added 0.1% and industrials jumped +1% to help the Top 40 close up 0.9% in a subdued trading day. The telecom sector dominated news flows and trading volumes. The sector climbed +1.4%. MTN group CEO Sifiso Dabengwa resigned with immediate effect and board chairman former CEO Phuthuma Nhleko will assume responsibility until a replacement CEO is found MTN shares gained +1.6%. Vodacom released pleasing set of half year results showing increased revenue, profit, capex and dividend, the gained +1.5%. Telkom announced they are in discussion to acquire all the shares in Cell C. AngloGold rose +1% after their 3Q report showed improved production and lower costs. The value traded was R13.5 billion and the rand was hovering around 14.31 to the US dollar at the close.

Trading Ideas

1) Long APN from R310, we believe Aspen has great long term value at current levels.
2) Day Trade: Long SHF from R84.60, the stock has strong support at these levels and represents a good opportunity to profit from a day trade.
3) Speculative Buy: Long AMS from R214, the stock was sold down on lower platinum prices and Lonmin issuing another rights issue, we believe there might be a bounce in Amplats on the back of a higher platinum price this morning.

02/11/2015

Capio Capital Market Overview and Trade Ideas

Asian markets are trading lower this morning after reports that China’s manufacturing activity remained below the 50 level signalling that their manufacturing is still contracting. Separate data also showed that exports in South Korea are declining emphasizing that the slowdown is affecting the whole of Asia. At the time of writing the Nikkei was down 1.8% led by financial and consumer stocks. The Hang Seng lost 6 tenths of a percent. Property companies China Resources Land Ltd. and China Overseas Land & Investment managed to buck the trend gaining 5% and 3% respectively. The Shanghai Composite lost 4 tenths of a percent and Australia is heading for its sixth consecutive day of losses falling 1.4% as financials, industrials and utilities all traded lower.

European markets ended Friday’s session mixed as investors responded to economic data and company results. Eurozone consumer prices were unchanged in October while the jobless rate fell to its lowest level in over two years. The DAX gained 0.45%. Germany’s September retail sales remained unchanged while expectations were that they would increase. The CAC gained just under a quarter of a percent Renault and Airbus both gained over 4% after posting strong third quarter results while L’Oréal fell 4.5% after third quarter revenue missed expectations. The FTSE lost just over half a percent. IAG and Barclays both lost over 2% as the former reported third quarter results which trailed forecasts and the latter reported a decrease in third quarter profit the previous session.

U.S. markets closed lower for the second consecutive day after a late afternoon pull back saw shares close at the low of the day. Markets traded with a lack of direction for most of the trading session. Investors seemed to be digesting mixed economic data as well as company results causing a few double digit moves on the day. Despite the Dow losing over half a percent and the S&P just under half a percent both indices managed to gain for the week. First Solar rocketed 12% after the biggest manufacturer of solar products in the U.S. said that third quarter profit nearly quadrupled. LinkedIn and Abbvie Inc. jumped 11% and 10% respectively as revenue beat forecasts while Genwoth Financial Inc. fell 10% after its profit missed estimates and their CEO said that there are limited options to assist the company with in the short term.

Friday saw the JSE close in the black for the first time last week. Diversified miners performed well, Kumba Iron Ore and Anglo American gained 5% and 3% respectively. Lonmin led gains among platinum miners surging over 12% as buying in London rose on the back of Investec upgrading its recommendation on the stock to a hold from a sell. Gold miners lagged, Anglo Gold Ashanti, Goldfields and Harmony Gold all lost over 2%. Data released showed that gold imports in India fell 45% in September after gaining substantially in the two proceeding months. British American To***co, SAB Miller and Richemont all managed to reach 52 week highs and MTN gained over 2% on the day but lost 17% for the week. Value traded was R19bn and the Rand was at R13.82 to the dollar.

Trading Ideas

1) Long APN from R300, we believe Aspen has great long term value at current levels.
2) Day Trade: Long SHF from R84, the stock has strong support at these levels and represents a good opportunity to profit from a day trade.

30/10/2015

Capio Capital Market Overview and Trade Ideas

Asian markets are trading mixed this morning, with the Nikkei bucking the trend, reversing early morning losses to trade at a two month high, after the Bank of Japan held off on expanding its massive stimulus programme. Chinese stocks are off their lows with the markets boosted by news that the Communist Party would partially relax its strict regulations on population control, allowing couples to have two children. Australian stocks remained weak as concerns about growth in China and the US weighed on resource counters. Macquarie Group gained over 2% after posting a record half year profit, while ANZ Banking Group lost over 3% following broker downgrades after posting weak results on Thursday. BHP Billiton and Rio Tinto are down 2.09% and 1.02% respectively.

European markets ended Thursday’s session lower, dragged down by disappointing company results and a sharp fall in mining shares. In London, Barclays fell 6.3%, after their profits missed forecasts and Smith and Nephew lost 4.7% after third quarter revenue disappointed, while Royal Dutch Shell dipped 1.46% after reporting a decline in profits due to lower oil prices and taking an$8.2biilion charge on abandoned projects. BHP Billiton, Glencore and Anglo American were all down more than 4%. In Germany, Deutsche Bank fell 6.88% after scrapping their dividend and announcing plans to cut about 26000 jobs through redundancies and the sales of businesses by 2018. Strong gains were seen in the telecom sector, with Nokia surging 10% after reporting better than expected quarterly profits and Telecom Italia rose 8.7% after a French tycoon bought a minority stake which could create a potential power struggle with its largest shareholder Vivendi over the Italian phone group’s future.

US markets closed lower last night as traders digested comments from the Fed and with some disappointing tech earning reports weighing on the market. A fall in the bullion price weighed on the gold sector, while substantial weakness was also seen amongst semiconductor stocks. Disappointing home sales data put pressure on the housing sector. GoPro Inc fell more than 15% after results missed analyst’s expectations. Allergen rallied 6% after the Botox maker confirmed they were in acquisition talks with Pfizer. Pfizer fell 1.9%. After the close, LinkedIn rallied 12.4% after reporting better than expected results.

The Top40 ended the day down 0.52% at 47941, tracking Asian and European markets lower after the US Fed indicated that it could raise rates as early as December. Mining and resource counters weighed heavily on the market, with the likes of Impala and Amplats faring the worst, falling 8.12% and 7.95% respectively. Gold stocks also lost ground with the index losing 4.68%. Sibanye Gold slumped 6.98% after cutting their output forecast and announcing that earnings per share would be at least 20%lower than the corresponding period in 2014. On the upside, SA Breweries closed at an al-time high of R839.92, up 2.84% and paper stocks outperformed with Mondi Plc adding 2.78% and Sappi closed up 2%. The value traded at the close was R18.2bn with the rand was trading at R13.85 vs. the dollar.

Trading Ideas

1) Long MTN from R152.50, we believe the fine that MTN received in Nigeria is totally overdone and MTN represents a great long term buy at these levels.
2) Day Trade: Long SHF from R84, the stock has strong support at these levels and represents a good opportunity to profit from a day trade.

29/10/2015

Capio Capital Market Overview and Trade Ideas

Asian markets took the cue from a strong close on Wall Street and open positively. Markets have since paired gains and are now trading in the red. The MSCI is down -0.9%. The Australian market is being dragged lower by commodity prices, BHP Billiton is down -1.4% and South 32 is down -1.7%. Woolworths share plunged -9% as they expect profit to be lower by -35%. In Japan, weak corporate earnings and a stronger yen has put pressure on the market. Tencent is currently down -0.9% in Hong Kong.

European markets closed firmly in the black as they anticipated the Fed interest rate decision. Healthcare and information technology sectors led the region. Energy stocks rose, assisted by a bounce in the price of crude oil. The FTSE climbed +1%, the Dax jumped +1.3% and the Cac added +0.9%. Sweden’s central bank kept their interest rates unchanged but increased their asset purchases. In Frankfurt, VW gained +4% after releasing their results despite posting their biggest quarterly loss. In London Meggitt an engineering group tanked -20% after missing their trading target. In Amsterdam, Heineken gained +4% after posting pleasing third quarter sales.

US markets closed well in positive territory after the Fed left interest rates unchanged as expected. The Dow, S&P500 and Nasdaq gained +1.1%, 1.2% and +1.3% respectively. At the open, Wall Street was upbeat and traded higher. We saw volatility as the rate decision was made but stocks managed to push higher. Janet Yellen stated that the economy had seen moderate improvements and that a December hike was not off the table. Of the 273 S&P500 companies that have reported, 47% have beaten sales estimates and 76% have had an earnings surprise.

The Top40 (-0.1%) closed virtual unchanged but closed introspection reveal large polar stock moves. The strong rand caused our market to underperform global markets until a strong open on Wall Street pushed our market to close flat. Resources closed down -1% dragged lower by diversified miners and within financials Discovery’s gains were offset by ITU losses. Rand hedges kept industrials in check and weakness was seen in Telecoms while retailers showed strength. The value traded was R20 billion and the rand was hovering around 13.53 to the US dollar at the close.

Trading Ideas

1) Long MTN from R155, we believe the fine that MTN received in Nigeria is totally overdone and MTN represents a great long term buy at these levels.

Economic Events

Time Country Event Period Survey Actual Prior Revised
29-Oct
01:50 JN Industrial Production YoY Sep P -2.60% -0.90% -0.40% --
08:00 SA Money Supply M3 YoY Sep 9.80% -- 10.02% --
08:00 SA Private Sector Credit YoY Sep 8.58% -- 8.60% --
10:55 GE Unemployment Claims Rate SA Oct 6.40% -- 6.40% --
11:30 UK Net Consumer Credit Sep 1.1b -- 0.9b --
11:30 UK Net Lending Sec. on Dwellings Sep 3.3b -- 3.4b --
11:30 UK M4 Money Supply YoY Sep -- -- -0.10% --
11:30 SA PPI YoY Sep 3.50% -- 3.40% --
12:00 EC Economic Confidence Oct 105.2 -- 105.6 --
12:00 EC Business Climate Indicator Oct 0.31 -- 0.34 --
12:00 EC Industrial Confidence Oct -2.8 -- -2.2 --
12:00 EC Services Confidence Oct 12 -- 12.4 --
12:00 EC Consumer Confidence Oct F -7.7 -- -7.7 --
14:30 US Initial Jobless Claims 24-Oct -- -- 259k --
14:30 US GDP Annualized QoQ 3Q A 1.70% -- 3.90% --
14:30 US Continuing Claims 17-Oct -- -- 2170k --
14:30 US Personal Consumption 3Q A 3.30% -- 3.60% --
14:30 US Core PCE QoQ 3Q A 1.40% -- 1.90% --
15:00 GE CPI YoY Oct P 0.20% -- 0.00% --
15:45 US Bloomberg Consumer Comfort 25-Oct -- -- 43.5 --
16:00 US Pending Home Sales NSA YoY Sep 7.20% -- 6.70% --

20/10/2015

Capio Capital Market Overview and Trade Ideas

A late afternoon surge closed the Top40 up +0.5% after a lacklustre trading day. Rand hedges and financials were the standout performers on the day. Resources fell -2.9%, industrials added +0.6% and financials gained +2.4%. Shoprite released Jun-Sep operational update which underperformed estimates and showed slowing growth, the share price plunged -6% and effect spilt over onto peers. Weaker commodity prices weighted on resources with gold stocks leading the fall, Harmony (-8%), Goldfields (-6%), AngloGold (-5%) to mention a few. The value traded was R20.4 billion and the rand was hovering around 13.26 to the US dollar at the close.

Most European markets closed Monday’s trading session in the black with FTSE bucking the trend, the Dax gained +0.6%, the Cac added +0.03% and the FTSE lost -0.4%. Eurozone construction output fell -0.2% from the previous month. Slowing GDP growth in China reduced the demand for metal and energy products which dragged resources across the region. In London, Anglo American tumbled -8%, Glencore tanked -6% and Fresnillo lost -3%. In Frankfurt, Deutsche Bank rose +4% after the company announced plans to re-structure. In Paris, Danone increased quarterly sales and jumped +2% on the news.

On the back of a strong close last week and disappointing Chinese data, traders were quick to take profit in the early trading session. Calmness returned and the major indexes closed marginally higher. The Nasdaq climbed +0.4%, the S&P500 added +0.1% and the Dow was flat. Morgan Stanley released their 3Q results which showed profits have decreased by -40%, the stock was drilled down -5%. Of the 65 S&P500 companies that have reported, 43% have met sales expectations while 73% have had earnings surprise. Bank of New York and Yahoo report later today.

Asian markets are taking the lead from a unconvincing close on Wall Street and are trading mixed this morning, the Nikkei and Shanghai indexes are positive while the ASX 200 and Hang Seng indexes are negative. In Australia, the banking sector is leading the losses after the banking regulator promised to take additional steps to ensure banks maintain strong capital reserves. Lower commodity prices added to the depressed market. BHP Billiton and South 32 are down -2.8% and -1.5% respectively. Tencent is currently trading down -0.4% in Hong Kong this morning.

Trading Ideas

1) Long MDC from R114, the stock has provided a great trading range between R114 – R124 to profit from a range trading strategy.
2) Long SAB from R808, the stock has also traded in a range between R807 and R820 and provides a great opportunity to profit from a range trading strategy.