Global Markets

Sentiment remained volatile ahead of important second quarter earnings out of the US. Stocks advanced earlier this week as a result of a pullback in crude prices and the Fed extending its lending program to financial institutions.This, coupled with a general retrenchment in commodity prices, resulted in a brief rally in equities.

Towards the end of the week, geo-political uncertainty in the Middle East triggered a rally in crude (settling around the $142 level) with the important Straight of Hormuz potentially at threat, this as a result of Iran's aggressive diplomacy (or lack thereof) and its missile testing.

Local Markets

Volatility continued to reign in local markets with the ALSI trading in the 3% range. The rand continues to surprise to the upside. Extensions of talks between MTN and Reliance should provide a bottom as large inflow of foreign capital remains a strong possibility. MTN should continue to trade between the R120 - R130 level although when compared with the PE's of its global peers, its fair value (excluding all corporate action activity) should be closer to R150; we remain bullish on the stock.

News that the JSE (operator of Africa's largest stock exchange) cut trading fees was well received by the broking community. However, retail investors shouldn't expect dramatic changes in fees as most of their costs are attributed to settlement. JSE traded a 52 week low this week on the back of lower trading volumes. The market continued to sell-off resource stocks with ARI, KIO and ACL being three of the four biggest losers of the week, losing between 6.5% and 10%. Bucking the trend was Lonmin, which was upgraded by Deutsche Bank, as their main furnace returns to operation.

Despite further concerns regarding Fannie Mae and Freddie Mac, SA banks rallied strongly with RMH and FSR leading, both up around 8%. We continue to hold our bearish view on the sector and look to sell into this bounce with the results around the corner and the revision of PE's probable on the back of lower earnings.

Massmart continues to surprise to the upside with sales up 14.7% to R39.8 billion and is by far the pick of the retail sector. Despite this stock trading at extremely low multiples, we remain short of the entire sector as basked sellers continue to dominate the market.