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.
We're now reaching out to 20,000 individual readers with our Weekly, building a valuable and valued relationship with an audience that is choosing to engage with us. The open rates are exceptionally high and the click though rates too are in double digits. In the first ten days of June alone we had 151 new subscribers, adding to the 652 new subscribers for the months of March, April and May. Orders too have grown strongly with orders in the first ten days of June 77% of the total for the month of May and over 90% of the orders for the month of May.
We greatly value your support and interest and as we expand and deepen our offering we're in the process of establishing a user friendly communications system whereby you can interact with us, quickly and with minimal friction, to volunteer input on what you'd like to see covered, locally, internationally, by sector, by stock, by topic and by investment market category, or simply just drop us a line and let us know what you think or suggest. We'll let you know just as soon as we've got this sorted.
Volatility returned with a vengeance to US and world markets this week. We see this is fertile ground for traders seeking short-term in and out trades. The week started bullish, then quickly turned bearish and then ended not quite knowing whether it was one or the other. The JSE too followed in unison as did the Australia ASX, which was closed on Monday as it was Queen Elizabeth's official birthday in Australia but ended Tuesday fairly buoyant following the US lead Monday.
Since Monday, the Chicago Board Options Exchange Volatility Index (VIX) in the US spiked to over 40 from 25 whilst the Nasdaq sentiment index went from 148 down to 77 in the blink of an eye - from optimism to pessimism 180 degrees.
This Nasdaq sentiment index measures the ratio of long calls to long puts - so 77 means that calls are 77% of the total of calls and puts combined whereas 148 shows us that there are significantly more calls relative to puts. A call option gives the holder the right to buy a stock and a put option gives the holder the right to sell a stock. Simply, more calls suggest bullishness whereas more puts would suggest fear that markets could dip.
As the sentiment index only measures retail investors, not institutional investors or market makers such as stock brokers, it is considered the best measure as it is private individuals taking a view and putting hard earned money on or off the table voluntarily. The change in a couple of days shows how fragile sentiment is with negative newsflow, including COVID-19, job losses and Federal Reserve intentions on interest rates, translating immediately into price action and shifts in behaviour and psychology.
This volatility coincides with a note this week on the topic entitled "What are volatility traders afraid of?" Our conclusion was that for traders, the elevated levels of VIX futures relative to historical volatility means that caution is necessary and that short term gains in the price of securities are reason enough to take profits whilst overreactions downward based on a turn in sentiment offers new money re-entry opportunity.
Foreign exchange too had a roller coaster - the rand started the week at around R16.80/$, strengthened to $16.40/$ on Wednesday, then bolted to R17.20/$ on Friday (a 5% move from its strongest trade) before ending the week at R17.05/$. Our Insight entitled "What do the currencies say?" was thus timely and is a popular download. With currency all over the show it is understandable that people are looking for guidance and we try to provide this but at the same time making a call to action on how you can potentially profit. It was our contention that the potentially most fruitful FX pairs to trade are short rand/USD, short lira/USD and long yen/USD - all of which played out.
Another call was on Sasol - we called a sell on Monday in the morning email suggesting traders take money away as above R180 per share it was way too rich. Sure enough, Sasol sank like a stone, falling to intraday lows of under R120 before closing the week at R140. We maintain our view that Sasol is one for the traders to play on volatility, not for long only new money.
We're also looking at other commodity markets constantly so check out our note on Monday entitled "Kumba, qaphela!" This revisits the iron ore market, following on from our note dated 14 May ("Iron ore and steel defies COVID-19 macro gloom").
The call on Kumba (and BHP) has been the right one with the share price of Kumba in particular up 40% since then. But what now? The rand is relatively weak, iron ore is firm, both earnings positive for Kumba but can this continue?
You may be aware that there is corporate action pending on Atlantic Leaf. The company has entered into an implementation agreement for a cash only acquisition of the company by South Down Investment LP - a wholly owned subsidiary of Apollo Global Management. This agreement is subject to shareholder approval of more than 75%. The largest shareholder is Vukile Property Fund with a 34.9% shareholding, and it has already voted in favour, as have directors. A deal is not over until it is over and we advise that if you hold Atlantic Leaf shares that you sell your shares whilst the stock is at a year-to-date high and above where it was prior to the announcement on 22 May.
Our most popular notes by download this past week include "Illusory value" (Prosus/Naspers/Tencent), "South African banks' balance sheets surge" and "Henry sends a message."
Thank you all for visiting us. |
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| Latest research notes published this week |
| On 14 May, in Iron ore and steel defies COVID-19 macro gloom, Ingham Analytics advised that they could see value in BHP and Kumba for the... |
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| | Volatility returned with a vengeance to US and world markets this week. This is fertile ground for traders seeking short-term in and out trades as pricing... |
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| What do the currencies say? examines the largest market of all, namely foreign exchange. Our objective in this note is to identify broad trends in this... |
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| | Sasol is up around 35% in a month. Is this the beginning of a major recovery? Ingham Analytics has issued a Searchlight on Sasol called Henry... |
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| The South African banking sector has already experienced tumultuous impacts from the COVID-19 lockdown fallout, with dramatic volatility in the currency market and derivatives markets reflecting... |
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