Hello Voornaam,
Welcome to another Ingham Analytics weekly research summary, highlighting what has been recently published and what has been among some of the most read notes in the past few weeks or months.
Six weeks into lockdown and there is real financial pressure across the country. We mentioned in "Lower for longer on rates?" that loan defaults because of the COVID-19 lockdown fallout and a decline in GDP will weigh down on banks' earnings and balance sheets, reiterating our long-held caution.
We try to be ahead of the curve, on Thursday S&P announced various ratings actions on local banks, in effect endorsing what we've been saying and modelling for some time. We were also ahead of the game with "Fixed income leads the way for equities" in signalling stocks and bonds diverging, now being picked up by other market commentators, especially in the US.
We are alert to signals internationally that have a bearing on South Africa and our analysis incorporates this to give a holistic sense of unfolding events and where investors can either capitalise for profit or stay clear as the risks remain to the downside.
Also in our COVID-19 credit markets Insight titled "Lower for longer on rates?" we examined this strange situation locally of a bifurcated market for short-term interest rates and long bond yields but looked at international precedent for the phenomenon of high and rising debt and lower yields and what it could mean for South Africa. These are important considerations when plotting an investment strategy.
"South African economic and financial fragility" asks just how fragile is the South African economy and financial system? Is the coronavirus a potentially killer blow or is this an enforced opportunity to reset our common economic health and priorities?
"Eurozone Stress Fractures - Dj vu all over again" explains the backdrop to what is happening to markets in the eurozone and draws lessons too for South Africa. "Whose telling fibs, equity or credit?" highlights the ineradicable links between the equity and credit markets.
One of the most popular notes this past couple of weeks was (yet again) on Sasol, "A raw state". Here, we question why the Lake Charles project will make such a large loss for the year, particularly as it should have a feedstock pricing advantage.
In these choppy equity, credit, foreign exchange, commodities, and derivatives markets we as a team try to provide you with a considered and practical view as we have our own skin in the game and align with you. Investors will have concerns, but they will have an eye for opportunity too.
We once again thank you all for visiting us and we appreciate those people who communicate individually through the website.
