Tuesday, 23 May 2017

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Naspers tips industrial index positive

Siki Mgabadeli




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SIKI MGABADELI:  Good evening and welcome to the SAfm Market Update with Moneyweb. My name is Siki Mgabadeli.

Let's check those markets. Another day where we had gold miners down quite sharply. Remember yesterday they were down 2.3%. Today they’re down 3.4%, leaving the all-share down but flat – down 0.09% at 52 496. The Top 40 is down 0.08%. The rand is at R13.19/dollar, gaining ground; it's at R16.88/pound and R14.18/euro. The gold price is at $1 277.97/oz, platinum at $975.81/oz and Brent crude at $52.76/barrel.

David Shapiro has been watching the markets for us today and joins us on the line. Hi, David.

DAVID SHAPIRO:  Hello, Siki.

SIKI MGABADELI:  What about these gold miners?

DAVID SHAPIRO:  I'm not quite sure, because the gold price is holding up pretty steadily. I think what's happening is the rand – the rand at R13.19/dollar is taking quite an edge off our gold miners. And platinum. Platinum is quite steady. Angloplats is down 5%, Harmony down 5%.

Sibanye down another 4.25%. I think investors are still concerned about the risk of their massive rights issue. It's going to dilute the company or dilute holdings. So, without anybody really sure, I think that was another big faller.

SIKI MGABADELI:  Naspers is continuing to see demand. Up over 1%.

DAVID SHAPIRO:  Your know what happened? Of course their big investment is Tencent, which is listed in Hong Kong. The reason – Tencent was up about 2.5% in Hong Kong this morning, really on an investment in what they call a used goods company, or a flea market which is e-commerce in used goods. I don’t know why that should have caused such a big rise in Tencent. I think Tencent is at an all-time high. I’ll check it. But it's not having the same impact on Naspers as it has on its own price. What you have to understand is, with Naspers up 1%, it has such a big weighting in the industrial index that it’ll offset a lot of falls on other companies like AB InBev, British American Tobacco, Richemont, Steinhoff, Mediclinic.

SIKI MGABADELI:  Aspen.

DAVID SHAPIRO:  All of those are big companies with big weightings. All of those were down. Yet the sheer weighting of Naspers in the index kind of tipped it into positive territory. MTN and Vodacom are also big shares in there, but they were up very, very modestly. So it did have a big impact.

But the rand – what we are seeing is foreigners coming into both banks and into retailers, as well as into our bond market, and both banks and retailers were quite strong today. Dis-Chem is up, Massmart – quite a few shares – Foschini up, all round about 2%. So they are taking advantage of the selloff that we saw recently, as well as in banks.

SIKI MGABADELI:  I think we've said that, when we look at the downgrade, the impact is going to start to show itself in various forms. There was some news today that Sanral has to delay their return to the bond market amid concern that they are going to struggle to attract investors. And of course that comes after Transnet raised only R20m of a planned R200m by tapping existing bonds. So it's going to be quite interesting to see how the state-owned enterprises survive the negativity. It's fascinating what's happening in that space.

DAVID SHAPIRO:  I agree with you. I think we are being far too complacent about what this is going to mean. And markets are kind of ignoring the impact, looking at the short-term impact of where we are now without really considering it. I tend to be a lot more cautious. You start to see signs.

There were no results out today. If you looked at Pick n Pay’s results, their sales were down if you take inflation. Volumes were down. Cashbuild also. This is a business that always does well. Another negative there. So I tend to look through a lot of results that we are seeing – from Stefanutti and smaller businesses that are really under pressure. Given the downgrade, which means that any company raising money is going to have to pay more for it, I tend to agree that one should be more cautious.

SIKI MGABADELI:  We need to watch that.

DAVID SHAPIRO:  You can't talk to computers. Computers have got no emotion.

SIKI MGABADELI:  True. Let's look at what's happening overseas. Is the dollar on the back foot still?

DAVID SHAPIRO:  Steadying. US markets are a little better. Once more I have to say we are going into a very good earnings season there, probably one of the best in about two years. But I'm worried about the French election. I look at the four candidates – two of them are extremely odd – Le Pen and Mélenchon. He’s a communist. Le Pen is far right.

SIKI MGABADELI:  She doesn’t like anybody, does she?

DAVID SHAPIRO:  They are equally weighted. You don’t know who the final two are going to be, and yet markets have basically ignored this.

If you look at European markets, they are quite strong today, also on the back of good results. America’s up. So I'm waiting for Sunday to see what happens. I just hope this is not another Trump or Brexit situation. I'm a lot more worried than the markets are.

SIKI MGABADELI:  Talking about Brexit, we are also watching what’s happening in the UK with that scheduled June 8 election. A lot of people that I'm reading seem to show that the Conservative Party will probably get it, because the Labour Party is quite divided.

DAVID SHAPIRO:  Labour is in such disarray at the moment, so Conservatives will get it. So she can basically do what she wants. That’s what's going to give her the licence to do that. It gives her another four years to do it in. She’s not going to be under pressure. You can't do that in the US, you can't have snap elections, but you can do it there; and you can do it here. Very interesting.

But also, in the UK market people are getting quite positive about the outlook and you are getting “Ah no, we overstated the negative”. I tend to be a lot more cautious about US stocks and what this is going to mean for US financials.

But Siki, I don’t know, I can't compete against some of the flows here. I haven’t got the brain or the money of a computer.

SIKI MGABADELI: Thanks, David. David Shapiro is with Sasfin.

 

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