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Profit taking expected to bite bourse as rate cut chances dim

Profit taking expected to bite bourse as rate cut chances dim < News < Bet On Markets

Johannesburg — Investors are expected to take profits on South Africa’s record-breaking stocks this week, as the chances of an interest rate cut by the Reserve Bank dim.

But banks, led by Absa, and retail shares are expected to remain attractive.

Hovering near six-year peaks around R5.7075 to the dollar, the rand could put a further dampener on the equities party.

On interest rates, a majority of 19 economists polled by Reuters last week forecast that the Reserve Bank would keep its repo rate unchanged at 7.5 percent this week. Equity dealers were also not betting on a rate cut, which could have kept stocks trotting upwards.

Ferdi Heyneke at Afrifocus Securities expected the rand to hold back mining stocks.

«The market has been strong but will see some consolidation on profit taking,» he said. «I don’t see a rate cut … spending figures suggest rates may not drop as this could spark a spending spree.»

Another trader, who held similar views on rates, said the market would move sideways rather than sharply down.

The corporate results scene has little to offer. Mid-cap Metro Cash & Carry, which owns 61 percent of Australia-listed Metcash Trading, posts its interim earnings tomorrow.

But the showdown vote by shareholders of Gold Fields on the agreed merger with Canada’s Iamgold could rivet the market’s attention tomorrow.

Financials are expected to keep up the bubbly performance of recent weeks since Britain’s Barclays filed a formal application to local regulators on its bid for a controlling stake in Absa.

«I’m quite positive on financials and retailers,» said Wilmar Buys at FFO Securities.

«I see Absa and Nedcor rising higher, but telecoms could see some more profit taking on MTN and Telkom.»

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