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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 20 September 2019
South Africa
As expected, the South African Reserve Bank (SARB) kept the local repo rate unchanged on Thursday, and the US Federal Reserve (Fed) lowered the US interest rate by 0.25%; however, the Fed also downplayed possibilities of further cuts in the future leading to a drop in the local market. At the closing bell, the All Share was down 0.17%.
United States
On Thursday, US markets opened higher thanks to a strong performances by Microsoft and energy shares after the US Fed cut the interest rate cut, despite the Fed dismissing dropping it again in the near future. At 21h20, the S&P 500 was 0.10% higher.
Europe
Investors snapped up lower Eurozone banks’ shares on Thursday, boosting markets after the Fed squashed expectations of more US interest rate cuts. At the end of trade, the STOXX 600 stood 0.61% in the green.
Hong Kong
Chinese shares closed slightly higher on Thursday ahead of China’s lending reference rate announcement, as investors waited to see if it would follow the Fed’s move. The Shanghai Index closed 0.46% up.
Japan
Japanese indices almost reached a 2019 high on Thursday after the Fed cut the US interest rate, boosting investors' risk-on sentiment. At the end of trade, the Nikkei was 0.38% in the green.
Rand
After a unanimous decision by SARB members to keep the local interest rate unchanged at 6.50%, the local currency took a slight dip. At 21h20, the rand traded at R14.81 per dollar.
Precious metals
Gold gained on a lower dollar while palladium reached an all-time high on Thursday as investors awaited more clarity around the Fed’s comments to bar further monetary cuts. At 21h20, an ounce of spot gold traded at $1 498.32.
Oil
Thursday saw Brent crude making up losses due to fears of Middle Eastern tensions escalating and concerns over “longer-than-expected supply shortfalls following Saturday’s attacks on a key Saudi Arabian oil processing facility.” At 21h20, a barrel of Brent crude traded at $64.73.
As expected, the South African Reserve Bank (SARB) kept the local repo rate unchanged on Thursday, and the US Federal Reserve (Fed) lowered the US interest rate by 0.25%; however, the Fed also downplayed possibilities of further cuts in the future leading to a drop in the local market. At the closing bell, the All Share was down 0.17%.
United States
On Thursday, US markets opened higher thanks to a strong performances by Microsoft and energy shares after the US Fed cut the interest rate cut, despite the Fed dismissing dropping it again in the near future. At 21h20, the S&P 500 was 0.10% higher.
Europe
Investors snapped up lower Eurozone banks’ shares on Thursday, boosting markets after the Fed squashed expectations of more US interest rate cuts. At the end of trade, the STOXX 600 stood 0.61% in the green.
Hong Kong
Chinese shares closed slightly higher on Thursday ahead of China’s lending reference rate announcement, as investors waited to see if it would follow the Fed’s move. The Shanghai Index closed 0.46% up.
Japan
Japanese indices almost reached a 2019 high on Thursday after the Fed cut the US interest rate, boosting investors' risk-on sentiment. At the end of trade, the Nikkei was 0.38% in the green.
Rand
After a unanimous decision by SARB members to keep the local interest rate unchanged at 6.50%, the local currency took a slight dip. At 21h20, the rand traded at R14.81 per dollar.
Precious metals
Gold gained on a lower dollar while palladium reached an all-time high on Thursday as investors awaited more clarity around the Fed’s comments to bar further monetary cuts. At 21h20, an ounce of spot gold traded at $1 498.32.
Oil
Thursday saw Brent crude making up losses due to fears of Middle Eastern tensions escalating and concerns over “longer-than-expected supply shortfalls following Saturday’s attacks on a key Saudi Arabian oil processing facility.” At 21h20, a barrel of Brent crude traded at $64.73.
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Our daily update
Below the latest Peregrine Treasury services market wrap focusing on South African equities
SOUTH AFRICAN EQUITY
An ultimately negative week was witnessed on local shores, as the only positive day seemed to be Monday which tended to be largely influenced by the MSCI rebalancing implemented on the day. With the oil price ‘going through the roof’ over the weekend, while the South African rand held relatively steady against most major countries, there was really no other reason for local equity markets to have been so strong on Monday. So what happened with regard to the rebalancing?
Major moves seen with regard to the rebalancing was Prosus (recently unbundled from Naspers) taking Sappi’s seat on the JSE Top 40 index. Sappi was seen dropping around 7% on the day, with R250 million being traded through it.
After a strong Monday, seeing most local indices delivering more than 1%, Tuesday took the role of the ‘Big Bad Wolf’, quickly wiping the smiles off of investor’s faces. On Tuesday, local markets were battered relatively hard. Some of the numbers were as follows:
EOH continues to fight an uphill battle, as a trading statement released on Wednesday alluded to further loss expectations, which came as quite a surprise to the market. The potential extent of the loss per share, over the last financial period, starts to point towards a more fundamentally dire situation within EOH. Although the general investor knows that EOH has been trying to carve a new way forward, given the investigations into potentially corrupt historical transactions, the weight of losing client confidence and trust may now start to take effect more materially, should such bitter-tasting announcements continue to be released.
Even though the share price reacted with a swift 13.00% drop on the announcement, it actually recovered back to the day’s opening price of around R12.70 relatively quickly. The 15 October release of the financial results may provide investors with a more certain idea of “where-to next” for EOH, given that the legal team investigating the potentially questionable transactions may provide more transparent insight to the company’s past. Until then, not much action should be expected from the share price. On Friday morning, EOH opened the trading day at R12.35 per share.
Comair (COM) released a surprisingly strong set of results, for the year ended 30 June 2019, which were materially assisted by a payment received from South African Airways with regard to SAA breaching the Competition Act in 2005. Overall, the company actually performed relatively well, when stripping out this once-off payment, however there were still one or two issues which continued to create a dragging-effect on the company:
Read the full Peregrine Treasury Services Market wrap here.
SOUTH AFRICAN EQUITY
An ultimately negative week was witnessed on local shores, as the only positive day seemed to be Monday which tended to be largely influenced by the MSCI rebalancing implemented on the day. With the oil price ‘going through the roof’ over the weekend, while the South African rand held relatively steady against most major countries, there was really no other reason for local equity markets to have been so strong on Monday. So what happened with regard to the rebalancing?
- R37 billion volume traded through the JSE All Share Index on the day (2019 daily average: R19.68 billion)
- Net foreign investor purchasing of SA Inc. (local companies generating revenues primarily in rands) came to around R6 billion
- Foreigners traded about 30% of the entire SA equity market on the day.
- Foreign interest on the day was focused on the following sectors:
- Just under R3 billion worth of consumer sector stocks were purchased
- Just over R2 billion worth of financial sector stocks were purchased
- Local funds were one of the only sectors to have been sold out of
Major moves seen with regard to the rebalancing was Prosus (recently unbundled from Naspers) taking Sappi’s seat on the JSE Top 40 index. Sappi was seen dropping around 7% on the day, with R250 million being traded through it.
After a strong Monday, seeing most local indices delivering more than 1%, Tuesday took the role of the ‘Big Bad Wolf’, quickly wiping the smiles off of investor’s faces. On Tuesday, local markets were battered relatively hard. Some of the numbers were as follows:
- All Share and Top 40 indices: down around 1.60%
- Resources index: down 0.47%
- Industrial index: down 1.89%
- Financial index: down 2.64%
EOH continues to fight an uphill battle, as a trading statement released on Wednesday alluded to further loss expectations, which came as quite a surprise to the market. The potential extent of the loss per share, over the last financial period, starts to point towards a more fundamentally dire situation within EOH. Although the general investor knows that EOH has been trying to carve a new way forward, given the investigations into potentially corrupt historical transactions, the weight of losing client confidence and trust may now start to take effect more materially, should such bitter-tasting announcements continue to be released.
Even though the share price reacted with a swift 13.00% drop on the announcement, it actually recovered back to the day’s opening price of around R12.70 relatively quickly. The 15 October release of the financial results may provide investors with a more certain idea of “where-to next” for EOH, given that the legal team investigating the potentially questionable transactions may provide more transparent insight to the company’s past. Until then, not much action should be expected from the share price. On Friday morning, EOH opened the trading day at R12.35 per share.
Comair (COM) released a surprisingly strong set of results, for the year ended 30 June 2019, which were materially assisted by a payment received from South African Airways with regard to SAA breaching the Competition Act in 2005. Overall, the company actually performed relatively well, when stripping out this once-off payment, however there were still one or two issues which continued to create a dragging-effect on the company:
- The grounding of the Boeing 737 MAX – of which the company had purchased two (overall impact of the grounding currently costs COM around R195 million); and
- Problems with maintenance scheduling and inventory management at SAA Technical.
- Revenue up 9% to R7.1 billion from a previous R6.5 billion
- Profit up by 184% due to R1.1 billion payment from SAA and R168 million worth of interest thereon
- Earnings per share (EPS) was up 175% to R1.92 per share vs last year’s R0.69 per share
- Headline EPS was up 184% to R1.97 per share vs 2018’s R0.69 per share
Read the full Peregrine Treasury Services Market wrap 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.
While the month of August was negative by -1.73% lets see what the month of September holds for the South African stock market.
So just more than half way through the month of September 2019 and so far the JSE All Share Index is up by 1.30% for this period and it looks like it is struggling to hold on to the gains made earlier in the month with the last 3 trading days being negative.
There continues to be concerns about a global economic slow down largely driven by the trade ware between the US and China. Continued tariffs by the US on Chinese goods and the retaliation by China by raising tariffs on US goods keeps hurting markets and global economic growth, as the world's two biggest economies continue to stand off in this trade war.
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
So just more than half way through the month of September 2019 and so far the JSE All Share Index is up by 1.30% for this period and it looks like it is struggling to hold on to the gains made earlier in the month with the last 3 trading days being negative.
There continues to be concerns about a global economic slow down largely driven by the trade ware between the US and China. Continued tariffs by the US on Chinese goods and the retaliation by China by raising tariffs on US goods keeps hurting markets and global economic growth, as the world's two biggest economies continue to stand off in this trade war.
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