Positive economic indicators may keep rally on full steam, say analysts
May 24, 2004
By Jo Winterbottom
Johannesburg - Stocks could rally 2 percent or more this week if economic indicators underpinned positive sentiment about the business climate, analysts said on Friday, although international uncertainty could weigh.
A flurry of upbeat results and trading outlooks from companies helped to boost the all-share index and the leading 40 stocks over 5 percent last week, with the latter rising close to a resistance point at 9 400.
Brewing giant SABMiller's 49 percent jump in year earnings, reported on Thursday, had pumped the market higher and could keep sentiment bubbly, analysts said.
"I think the upwards rally could continue," said Bennie Strachan, portfolio manager at Real Africa Asset Managers.
"The JTopi correcting to 9 600, that's my target."
Statistics due out tomorrow are expected to show the economy grew 3 percent in the first quarter from the fourth quarter of last year, when it expanded by 1.3 percent, according to consensus figures from 13 economists.
Inflation was likely to be broadly steady in April at 4.6 percent year on year when official figures were published on Wednesday, from 4.4 percent in March, the poll suggested,.
But international uncertainties would continue to have an influence, analysts added.
Oil prices will be watched carefully. Opec met at the weekend for informal talks against a background of US crude prices above $40 (R268) a barrel.
Any indications on future prospects for growth in China, a major export market for South Africa's giant metals mining companies, would also sway sentiment, analysts said.
Last Wednesday mining stocks shot higher after China ruled out an immediate interest rate hike, easing fears its economy and buoyant industrial demand might suffer a sharp slowdown.
Analysts said mining companies could extend gains, which have pushed the gold mining index up 6.8 percent last week, with global heavyweight Anglo American and BHP Billiton tipped to lead any rally.
Platinum mining companies such as the world leader, Anglo American Platinum, and its smaller competitor, Impala Platinum, were also tipped for gains, especially if platinum prices hung on to levels above $800 an ounce, analysts said.
Among the firms reporting results this week, investment banking group Investec publishes annual figures on Thursday.
After upbeat statements from Standard and Absa last week, shareholder have hope for earnings gains.
Investec gave an outlook in March which prompted investors to expect a modest rise in full-year earnings after a slide last year.
Standard Bank said last week it had made a strong start to the year, while rival Absa predicted underlying earnings for the year to March would be in line with the trend at the half-year, when profit was up 20 percent.
"We quite like Investec and I think they've done quite well," said Rob Slater-Jones, a trader at Thebe Securities.
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