| The Reserve Bank dropped the repo by 25 basis points to 3.5% at the end of its Monetary Policy Committee meeting yesterday - the fifth interest rate cut this year as it responds to the economic impact of Covid-19 and the national lockdown. Ingham Analytics believes another cut of the same magnitude seems likely before year end. Their view is that interest rates are a blunt instrument when an entire economy is largely throttled, in more ways than one. It's tantamount to pushing on a piece of string. Ingham Analytics have repeatedly warned about exposure to major banking stocks, with Capitec remaining its route for getting exposure to the sector. You'll find all their latest notes down below, including their most recent call on Capitec. One company likely to welcome the rate cut is Spur, although the damage has already been done to its latest financial results. The restaurant group says sales fell off a cliff in April and May and are likely to remain under pressure due to constrained consumers, the ban on alcohol sales and the curfew. Despite warning of a 40% plus decline in earnings for the year, its shares ended a little higher yesterday. Investors also responded positively to updates from Impala Platinum and PPC, pushing their shares higher, while Sasol, Vodacom and Invicta closer lower after releasing updates. More on all those stories in your final newsletter of the week, as well as the latest mergers and acquisitions news courtesy of DealMakers. Have a great weekend. Stephen Gunnion Managing Editor, InceConnect
Recent notes from Ingham Analytics Ingham Analytics have repeatedly warned about exposure to major banking stocks in several notes - the latest drop in repo is yet another negative endowment effect added to which is the parlous state of government finances, also bank negative. The Big Four banks' share prices were hit. Capitec is less impacted and we reiterate that for those interested in exposure to the sector this is the one to go for, although since our last call (see "Rating retreat") the share is up 12% and looking a bit stretched. With reference to "Tech and the Treasury 10s" take note of the 10-year US Treasury - down to 0.57%. Cheap money is simply fuel for already elevated stocks - and gold too. Microsoft and Tesla reported quarterly results, but the market isn't clapping when perfection pricing commands extraordinary results just to stand still. We've flighted the possibility of takeover activity on Barloworld this week (see "Saudi Arabian stalking horse") and we'll be keeping tabs on that. Other recent notes of topical interest include "US data provides a chink of light in Covid-19 gloom" and "(I)n (M)y (F)ace.....and yours".
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