Cannon Asset Managers: Making Cents of the Swiss Franc skyrocketing
Compiled by Samantha Pauwels & Rynel Moodley
Highlights
Financial and commodities markets slumped after the World Bank cut its growth forecasts for 2015 and 2016, fuelling fears that the benefits of cheaper oil may be offset by anaemic economies and the threat of deflation. Gold however, traded near its highest level in four months as investors sought safety from market volatility following the Swiss National Bank's surprise move to scrap the cap on the franc.
Locally, South Africans are bracing themselves for recurrent electricity cuts as Eskom grapples with the twin problems of building new capacity while playing catch-up with the maintenance of its old, neglected power stations. Retail trade sales came in better than expected in November 2014 compared with a year ago, increasing by 2.6%. Manufacturing production fell by 1.3% in November last year compared with a year ago after increasing by 2.3% year on year in October.
Graph of the Week: The Swiss Franc's Skyrocket Move
The Swiss franc soared nearly 30 per cent against the euro and 28 per cent against the dollar on Thursday after Switzerland's central bank (SNB) dumped a three-year-old cap on the franc's value against the euro, sending shockwaves through currency markets. The swings in the franc were the biggest since most major currencies moved to free-floating regimes in the 1970s.
Tiny Switzerland's travails underline the bigger issue: Europe's inability to restore economic growth. They have been far too slow in forcing banks to recognise losses, raise capital and get back to business as usual. As a result, the euro area has endured serial recessions and is now teetering on the brink of deflation.
Frantic trading followed, driving Swiss stocks down 8.7 per cent, putting them on track for their biggest one-day fall in at least 25 years. "Today's SNB action is a tsunami; for the export industry and for tourism, and finally for the entire country," Swatch Chief Executive Officer Nick Hayek said by e-mail.
| Index | Index value | YTD | 1 year | 3 year | 5 year | CurrentPE | LT Avg. PE (10yrs) | CAPE (7yrs) |
| JSE All Share | 48,524 | -2.5% | 7.7% | 60.1% | 101.0% | 16.5 | 15.0 | 17.9 |
| Resources (Resi 10) | 39,101 | -6.7% | -21.3% | -21.2% | -14.8% | 9.9 | 15.5 | 12.1 |
| Financials (Fini 15) | 15,155 | -3.1% | 23.5% | 97.3% | 149.1% | 14.6 | 13.0 | 15.0 |
| Industrials (Indi 25) | 61,347 | -1.6% | 15.0% | 125.9% | 226.6% | 22.2 | 16.9 | 29.0 |
| Top 10 Gainers – across the JSE | Top 10 Losers – across the JSE | ||||
| Company/Stock | % Chg. | Company/Stock | % Chg. | ||
| 1 | HARMONY GOLD MINING CO | 17.1 | 1 | ANGLO AMERICAN | -10.1 |
| 2 | ANGLOGOLD ASHANTI | 11.1 | 2 | GROUP FIVE LTD | -8.9 |
| 3 | SIBANYE GOLD | 11.6 | 3 | CONSOLIDATED INFRASTRUCTURE | -7.7 |
| 4 | INVICTA HOLDINGS | 10.0 | 4 | PPC | -7.6 |
| 5 | ALLIED ELECTRONICS CORP | 8.6 | 5 | GRINDROD | -7.3 |
| 6 | NIVEUS INVESTMENTS | 8.3 | 6 | KUMBA IRON ORE | -7.0 |
| 7 | HOSPITALITY PROPERTY FUND | 8.2 | 7 | TRUWORTHS INTERNATIONAL | -7.0 |
| 8 | NET 1 UEPS TECHNOLOGIES INC | 8.1 | 8 | BARLOWORLD | -5.9 |
| 9 | CLIENTELE | 7.9 | 9 | RICHEMONT | -5.7 |
| 10 | RHODES FOOD GROUP PTY | 7.1 | 10 | NASPERS | -5.6 |
Quote of the Week
"To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights or inside information. What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework". ~ Benjamin Graham
Did you know?
The South African government is in talks to possibly extend the age for child grants for needy children from 18 years currently to 23 years. The government has received mixed responses regarding the move. Some parties support it whilst others question the timing and are of the opinion that it will make people more dependent on government. Spokesperson for the minister of Social Development, Bathabile Dlamini said that "this is about our investment in human capital". Source: City Press
Cannon Media
One of our senior portfolio managers, Victor von Reiche joined CNBC Africa this week to share his must-have stock picks for 2015: http://www.cnbcafrica.com/video/?bctid=3990201773001
| Weekly Highlights | |
| Friday, 09th | Unemployment Rate (Dec)|USThe unemployment rate in the US improved to 5.6% in December from 5.8% in November. Analysts were forecasting a drop to 5.7%. |
| Monday, 12th | Manufacturing Production Index (Nov)|South AfricaThe manufacturing production index recorded an unexpected drop of 2.1% on a monthly basis relative to a revised advance of 0.1% in October. The market had anticipated a 0.5% rise in the manufacturing production index. |
| Tuesday, 13th | Small Business Optimism Index (Dec)| US The NFIB Research Foundation reported that the small business optimism index rose to a level of 100.4 compared to a level of 98.1 in November. Market expectations were for an advance to a level of 98.5. |
| Wednesday, 14th | Retail Sales (Nov)|South AfricaRetail sales growth slowed less than expected, growing 2.6% year-on-year compared to 3.2% recorded in October. On a monthly basis, retail sales climbed to a seasonally adjusted 1.5%. |
| Thursday, 15th | Swiss Bank scraps Euro peg | SwitzerlandThe Swiss National Bank (SNB) surprised markets on Thursday when it scrapped its three-year-old peg of 1.20 Swiss francs per euro. Minutes after the announcement, the Swiss Franc soared by around 30% against the Euro. |