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In our continued efforts to give our readers a broad number of views, opinions and information, we continue to provide PSG's daily market updates and add our own daily inputs in at the end.
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Short summary of PSG's market commentary for 10 June 2019
South Africa
Despite the rand recording its worst week since February when South Africa was hit by load shedding, the JSE ended the week in the green. At the end of trade, the All Share rose 1.77%.
United States
US markets opened Friday on a high as slower jobs data increased opinions that the US Federal Reserve Bank will cut rates and reports surfaced that the US gave China more time to avoid a tariff hike. Shortly after the JSE closed, the Dow Jones was 1.07% up.
Europe
European shares noted their best week since early April on Friday, boosted by a strong performance in Paris and hopes that the central bank could “support global growth with more accommodating policies”. The STOXX 600 closed 0.93% higher.
Hong Kong
Chinese and Hong Kong markets were closed on Friday for a public holiday.
Japan
The Nikkei ended the week up, based on reports that the US might delay implementing a tariff hike on Mexican goods. At the end of trade, the Nikkei was up 0.53%.
Rand
On Friday, the rand breached the R15/$ barrier due to political uncertainty around the South African Reserve Bank’s mandate; it reached levels last seen during Eskom’s level 4 load-shedding in February. However, after the local market closed, it made up ground again. At 17h50, the rand traded at R14.96 against the dollar.
Precious metals
Although steadied, bullion prices inched up on Friday, aiming for its best week since March 2018 thanks to investors seeking a safe-haven amid the US trade disputes. At 17h50, an ounce of spot gold cost $1 343.44.
Oil
Oil prices climbed about 2% on Friday on the back of comments that OPEC and other oil producers might extend their output reduction deal. At 17h50, a barrel of Brent crude traded at $63.73.
Despite the rand recording its worst week since February when South Africa was hit by load shedding, the JSE ended the week in the green. At the end of trade, the All Share rose 1.77%.
United States
US markets opened Friday on a high as slower jobs data increased opinions that the US Federal Reserve Bank will cut rates and reports surfaced that the US gave China more time to avoid a tariff hike. Shortly after the JSE closed, the Dow Jones was 1.07% up.
Europe
European shares noted their best week since early April on Friday, boosted by a strong performance in Paris and hopes that the central bank could “support global growth with more accommodating policies”. The STOXX 600 closed 0.93% higher.
Hong Kong
Chinese and Hong Kong markets were closed on Friday for a public holiday.
Japan
The Nikkei ended the week up, based on reports that the US might delay implementing a tariff hike on Mexican goods. At the end of trade, the Nikkei was up 0.53%.
Rand
On Friday, the rand breached the R15/$ barrier due to political uncertainty around the South African Reserve Bank’s mandate; it reached levels last seen during Eskom’s level 4 load-shedding in February. However, after the local market closed, it made up ground again. At 17h50, the rand traded at R14.96 against the dollar.
Precious metals
Although steadied, bullion prices inched up on Friday, aiming for its best week since March 2018 thanks to investors seeking a safe-haven amid the US trade disputes. At 17h50, an ounce of spot gold cost $1 343.44.
Oil
Oil prices climbed about 2% on Friday on the back of comments that OPEC and other oil producers might extend their output reduction deal. At 17h50, a barrel of Brent crude traded at $63.73.
Our daily update
As per usual we start of weekly investment update off with the latest Peregrine Treasury Services weekly markets wrap, but focus on the South African Equities part of their weekly markets wrap. Find it below.
SOUTH AFRICAN EQUITY
Still trapped under the sombre veil of the recent elections and reshuffles within the greater parliament, the JSE Top 40 and All Share indices surprisingly clawed back just under 4.00% over the last five trading days. The catch however, was that the primary catalyst for this move was the weaker rand against the US dollar. With over 60.00% of the overall revenue’s generated by JSE listed companies being primarily denominated in US dollars, the weaker rand actually saw the larger dual listed-companies and miners push the indices higher. The drastic sell-off witnessed at the end of May has now started to present fairly attractive levels to re-enter the market again, albeit companies with US dollar exposure taking heavy preference.
Having said this, the banking sector, as well as retail sector, was seen remaining relatively flat for the week, while the resource sector had a very positive week. The industrial index rose more than 4.00%, off the back of robust moves from dual-listed stocks such as Naspers, Richemont, British American Tobacco and MTN.
A cautionary announcement was released by Spur Corporation on Monday evening pointing toward the possibility of Grand Parade Investments (GPI) continuing to sell down on their 17.50% ownership stake in Spur. This follows GPI’s disastrous venture into two dessert chain stores, namely Dunkin’ Donut’s and Baskin Robbins. The initial American fast-food brand-hype ultimately proved short-lived, due to poor local adoption by consumers. In addition, the arrival of both brands, on South African shores, saw relatively expensive franchise fees impacting GPI’s cash flow negatively.
The Burger King business, on the other hand, has proved to be a home run for GPI. It roughly owns the rights to 91.10% of the burger chain’s South African dealings. The rapid roll out of roughly 69 stores and the positive buy-in from the South African public has resulted in reasonable success for GPI. The high-speed growth of the business has increased its role as a competitor to Spur. Burger King’s expanding business is beginning to bring up questions of possible ‘conflicts of interest’, when comparing GPI’s investment position in both companies.
The negative impact of the confectionary businesses, coupled with the potential to expand Burger King even more, has given GPI the perfect opportunity to either trim or sell down entirely on its holdings in Spur, in order to create a source of strategic cash flow for the business - be it settling debts or focusing on other strategic investments. The likelihood of a full withdrawal isn’t high, but one could reasonably expect GPI to trim its ownership in Spur down to initial investment levels of around 10.00%. At that sort of level it would still provide Spur with the benefit of the BEE partnership with Grand Parade Investments. Spur opened up Friday’s trading day at R22.20 per share
Although bitter-sweet, Sibanye Gold saw their share price rising by more than 10.00% following news that their restructuring process would only see around 3,450 jobs being lost versus an initially expected 5,870. Due to various mining operations within the firm operating as loss making entities since 2017, a carefully designed restructuring plan was needed – one that would create as little impact as possible on employment numbers. Opening the week around levels of R13.37, Sibanye opened Friday’s trading day at Rxxx per share.
Here’s some of the bigger movers on the JSE for the 2019 year so far, as at Friday morning:
Read the full article here
SOUTH AFRICAN EQUITY
Still trapped under the sombre veil of the recent elections and reshuffles within the greater parliament, the JSE Top 40 and All Share indices surprisingly clawed back just under 4.00% over the last five trading days. The catch however, was that the primary catalyst for this move was the weaker rand against the US dollar. With over 60.00% of the overall revenue’s generated by JSE listed companies being primarily denominated in US dollars, the weaker rand actually saw the larger dual listed-companies and miners push the indices higher. The drastic sell-off witnessed at the end of May has now started to present fairly attractive levels to re-enter the market again, albeit companies with US dollar exposure taking heavy preference.
Having said this, the banking sector, as well as retail sector, was seen remaining relatively flat for the week, while the resource sector had a very positive week. The industrial index rose more than 4.00%, off the back of robust moves from dual-listed stocks such as Naspers, Richemont, British American Tobacco and MTN.
A cautionary announcement was released by Spur Corporation on Monday evening pointing toward the possibility of Grand Parade Investments (GPI) continuing to sell down on their 17.50% ownership stake in Spur. This follows GPI’s disastrous venture into two dessert chain stores, namely Dunkin’ Donut’s and Baskin Robbins. The initial American fast-food brand-hype ultimately proved short-lived, due to poor local adoption by consumers. In addition, the arrival of both brands, on South African shores, saw relatively expensive franchise fees impacting GPI’s cash flow negatively.
The Burger King business, on the other hand, has proved to be a home run for GPI. It roughly owns the rights to 91.10% of the burger chain’s South African dealings. The rapid roll out of roughly 69 stores and the positive buy-in from the South African public has resulted in reasonable success for GPI. The high-speed growth of the business has increased its role as a competitor to Spur. Burger King’s expanding business is beginning to bring up questions of possible ‘conflicts of interest’, when comparing GPI’s investment position in both companies.
The negative impact of the confectionary businesses, coupled with the potential to expand Burger King even more, has given GPI the perfect opportunity to either trim or sell down entirely on its holdings in Spur, in order to create a source of strategic cash flow for the business - be it settling debts or focusing on other strategic investments. The likelihood of a full withdrawal isn’t high, but one could reasonably expect GPI to trim its ownership in Spur down to initial investment levels of around 10.00%. At that sort of level it would still provide Spur with the benefit of the BEE partnership with Grand Parade Investments. Spur opened up Friday’s trading day at R22.20 per share
Although bitter-sweet, Sibanye Gold saw their share price rising by more than 10.00% following news that their restructuring process would only see around 3,450 jobs being lost versus an initially expected 5,870. Due to various mining operations within the firm operating as loss making entities since 2017, a carefully designed restructuring plan was needed – one that would create as little impact as possible on employment numbers. Opening the week around levels of R13.37, Sibanye opened Friday’s trading day at Rxxx per share.
Here’s some of the bigger movers on the JSE for the 2019 year so far, as at Friday morning:
- Impala Platinum: up 68.62%
- Kumba Iron Ore: up 55.13%
- Lonmin: up 75.33% (up over 15.00% in the last week)
- Tongaat Hulett: down 71.66%
- Rebosis Property Fund: down 68.03%
- Delta Property Fund: down 53.33%
Read the full article here
Our JSE All Share index daily performance calendar
Visit our JSE Calendar tracker page for a expanded version of the calendar below
The graphic below provides the daily returns of the JSE All Share Index (J203) on a calendar chart. Provides a great overview of the All share index over the course of the month. It will be updated daily with our daily investment update as received from PSG.
So after four very positive months on the markets the month of May bucked the trend and saw half the gains made during the first four months of the year on the JSE wiped out in one month. While the South African Rand has really been struggling the Rand hedges on the JSE has been pushing the local stock market higher, with the first week of June recording 5 positive trading days in a row. The JSE All Share Index ended the week higher by 4.37%
For more on daily market movements see our 2019 Calendar tracker.
But we as South African investors are losing out in Dollar terms. Largely due to continued Rand weakness not only over the short term but over the last couple of years. We continue to advise investors to take money out of South Africa and invest it offshore. Looking for ideas for investments to make? Go read this article
For more on daily market movements see our 2019 Calendar tracker.
But we as South African investors are losing out in Dollar terms. Largely due to continued Rand weakness not only over the short term but over the last couple of years. We continue to advise investors to take money out of South Africa and invest it offshore. Looking for ideas for investments to make? Go read this article