Thoughts from the SA trading desk

Focus for SA markets is the June expiry today. Some reweights are also happening (let us know if you have not received anything on this). Offshore markets mainly expire tomorrow while SA is closed for Youth Day. The ECB will likely raise rates by 25bps today. More importantly, what will the BoJ do? The last CB standing firm on QE is coming more and more under pressure. A change of language will mean headwinds for global risk and further repatriation risk for Japanese investments outside of Japan.

Outside of Japan, markets are now firmly predicting that we are at the peak of global rate hike cycles. Equity markets in the U.S. have already started to play this side of the classic books. Problem is that we still face the recession risks; many now talk about a goldilocks scenario of soft landing. Handbrake off – full speed ahead. Bulls talk about USD weakness and further support for risk. Growth stats are lagging, so nothing to worry about. No micro data currently, and just look at the U.S. 10year – that’s coming off! BULLISH. We ignore the curve that is as inverted as it can get – usually the sell-off for equities happens when we see this steepening btw. China stimuli are predicted to come as big as they get. The mother of all China stimuli. The thing is that China now has a debt problem and a massive property problem – stimuli in the old school of China are not as easy to launch. Business confidence has taken a knock, not surprising looking at Xi’s hard-core Mao views.

One stock that I am currently very passionate about is Anheuser. The company is tripling its U.S. marketing budget for Bud Light. This story is bigger than beer! I cannot ignore all the other tailwinds for the mighty BUSCH – EM FX, hot summers, China stimulus, defensive nature. Check this ad. What about SA? This rally of SA Inc in my view is running into reality checks pretty soon. The sentiment was terrible, yes – for good reasons though. It can’t get any worse, etc etc. I think it’s too early to be mega bullish. I have learnt to wait and see in SA – if things are really really changing, you have time to get long and hold onto this rocket ship. Again, SA could create its own growth, like India. Even Nigeria is changing in the right ways now. NHI is just a subtle reminder of the underlying policies and views the current government has. Remember, it is not over until the fat lady sings. Hold my Bud beer!