South African stocks may focus on banks

05 Sep, 2004

The South African bourse will focus next week on persistent rumours swirling about possible take-overs in the banking sector, but their shares could dip on profit-taking after a strong run, market players said.
On the results front, synthetic fuels and chemicals group Sasol will attract interest as it publishes full-year results that are expected to slip due to a strong rand.
Speculation emerged again this week that a major UK bank was preparing a bid for one of South Africa's four main banking groups - Absa, FirstRand, Nedcor or Standard Bank.
With the sector booming on the back of healthy economic growth, low inflation and rate cuts, analysts say the main banks except perhaps Nedcor are possible take-over targets since Nedcor parent Old Mutual has said it does not want to sell.
"The others have made some signals.
They would be willing to have a bigger suitor and the market is playing to that," said Craig Pheiffer, investment strategist at Sasfin Frankel Pollak Securities.
"I would probably tend to look at some of these prices and take a little bit of profit, just lighten up into a bit of strength, but I wouldn't sell out all my holdings," he added.
The banking index shot up 12 percent during the 10 trading sessions up to an intra-day peak on Thursday.
On Friday afternoon it was up 0.6 percent at 17,256.46 points.
Fundamentals as well as rumours are boosting the share prices, with a surprise interest rate cut last month adding to the optimism.
Although lower rates can pressure margins, this should be outweighed by strong consumer spending and lower bad debt provisions, analysts say.
The main attraction among results will be Sasol, which is due to release full-year numbers on Tuesday.
Sasol, the world's biggest producer of synthetic fuel from coal, is expected to post a 23-percent fall in annual headline profits next week after a strong rand hit export earnings.
But a blistering rally in oil prices will push up second-half profits 46 percent in comparison with the first six months, analysts said.
Another blue chip stock, the country's second biggest investment company VenFin Ltd, is also due to report full-year results on Tuesday.
Last month Venfin said earnings per share for the 12 months to end-June were expected to be 10-20 percent higher than in the same period a year ago.
The company's biggest investment is a 15 percent stake in Vodacom, South Africa's largest mobile phone operator.
On Wednesday, mid-cap insurer Metropolitan is due to post a healthy rise in half-year profits.
The firm said in a trading statement last month that improved operational performance as well as better returns on investments would boost earnings by 20-40 percent for the six months to end-June compared to the year-ago period.
In May Metropolitan said it had boosted new business premiums by 23 percent in the first quarter to 703 million rand.

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