The Money Shot

The Rand fell 4% for the month of October, but it translated into a 5.7% gain on the stock market. Some good and some bad news on the economic data front for SA, and the Bank of England raises interest rates for the first time in 10 years. In the US, non-farm payrolls disappointed and Trump has put forward his candidate, Jay (Jerome) Powell, to replace Janet Yellen when her term ends in February. There wasn’t much in SA company news, the focus was all in the US: Facebook, Tesla, Mastercard, Pfizer and ‘the great and good’ Apple (getting closer to being a $1trn market capitalisation company).

The Rand reacted swiftly to the very disappointing budget, but at least the weaker Rand had a positive effect on the Stock market. Rand hedges were higher this week (Naspers now R3407 per share), and both Clicks and Dis-Chem reported some decent numbers. Also reporting, was ABInBev – saved by SABMiller and the emerging market consumer... as did Old Mutual Wealth (the UK business makes up 28% of the valuation of Old Mutual). AVI started trading under a cautionary. PPC has announced a bid from Lafarge Holcim, which sent the stock over R7 on Friday. And Amazon’s spectacular results has made Jeff Bezos the wealthiest man in the world again.

The Rand is blowing out on all the political shenanigans this week – cabinet reshuffle, rumours of CR17 and President Putin. A weaker Rand is good for Rand hedges, but bad for local shares. CPI inflation was very disappointing at 4.6% (headline inflation came in at 5.1%) – fuel inflation (5% of CPI basket) jumped 12.2% in Sept (vs 5.7% in Aug). And again, we’re seeing a local company look offshore for acquisition: FSR announced that they’re buying UK specialist lender Aldermore, Group 5 let a R1.6bn offer from Greenbay Properties lapes on Friday, and DSY finally got their banking license. Pick n Pay released H1’18 results and Richemont also released results - it looks like things have finally turned for the luxury goods sector. US earnings season has started with a bang as Netflix released results and the share was up over 4%... same story with Paypal, the share was also up >4% on the day of results. We’ve got SA Budget on Wednesday at 2pm – lots of questions about Nuclear.

Market update – out of the last ten trading days, we only had one negative close, while the Rand continues to strengthen - currently 13.26 / US$. Some good news in the manufacturing sector as August prints at 1.5% growth vs expectations of ½ % contraction. In company news, the PPC saga continues and Mondi released Q3 results – a shocker of a result, but is there a nice surprise waiting for us as they de-lever their balance sheet? PSG releases H1 results – good old steady eddie. Sun International acquires Thunderbird Resorts in Peru – are they really ready to acquire again, after a less than incredible run in the last year? Founder and CEO of Outsurance, Willem Roos, resigns – what impact will this have on the company?

The JSE has reached all-time highs despite the economy still struggling along, while there are lots of companies either unbundling, being taken over or bids being retracted. The US employment number decreased for the first time since Sept 2010, thanks to Hurricanes Harvey and Irma (or is it Trump?). And Anthea warns of the perils of corruption and how the Transnet pension fund was used to aid the Gupta purchase of Optimum Coal mine.

Even the 1% positive close on Friday couldn’t save the JSE from a negative September. On the macro front, Private Sector Credit Extension was released and indicates that the consumer is deleveraging 6.6% year on year and we managed to maintain a Trade Surplus of R6bn. The SAA bailout which saw NT approve a transfer of R3bn from the National Revenue Fund is discussed and Anthea is disappointed by the WEF annual competitiveness report showing that SA fell 14 points to be ranked 61. Plus in the US, jobless claims climbed by 12k to 272k and US 2nd Quarter GDP growth came in at 3.1%.

The Rand weakened for a sixth straight session on Friday (-1.3%) and the stock market remained soggy, falling another ½% - with all major indices lower. Commodity catch up: Gold lower ahead of ECN and US Fed meeting this week (especially after last week’s US consumer inflation number). Oil is at 5 month highs and Iron Ore has slumped after Chinese data printed lower than expected...

Quite a few companies reporting this week - AVI today, Aspen and Impala Platinum on Thursday, Richemont on Wednesday. It's the launch of the Apple iPhone 8 tomorrow, plus several new products including a new version of the Apple Watch and Apple TV. The iPhone is about two-thirds of Apple’s revenue with the share up 37% this year, making them the world’s most valuable company. The JSE All Share is up 12% for the year. Naspers is up 42% this year and makes up close to 20% of the index.

Global markets started the day stronger on Friday because of positive Chinese manufacturing data, and somehow even the US opened strongly despite weaker than expected non-farm payrolls. The US reported creating 156,000 jobs for the month of August versus an expecting 180,000 – wage growth remained constant at 2.5%y/y. The Dollar initially weakened, leaving the stronger Rand to keep our market in check. We discuss Discovery, Stellar Capital and Mr Price reports. Jannie Mouton has transferred R1bn into a charitable trust after seeing an interview with a smiling Warren Buffet talk about giving away 99% of his wealth.

We had 5 straight days of gains last week, with the All Share index ending just a tenth of a percent higher on Friday, and 2.6% higher for the week. Retailers: we dissect Woolworths and Massmart results; not a pretty picture. Let’s have a conversation about the value of your vote as a shareholder, shareholder activism and Naspers. Koos Bekker (Chairman of Naspers) said at the AGM on Friday on the notion of corporate governance: “It sounds wonderful. If you want to be the best soccer team in the world it is important to wash your hands after using the bathroom. But will you win? Not unless you train the hardest, recruit the best and are merciless in your ambition. Once you have won, then you can look at things. If you lose, the best governance in the world can’t help you.” No surprise… Yellen’s last speech at Jackson Hole was - as suspected - a damp squib, while (super) Mario Draghi confirmed that the ECB will continue the process of eliminating quantitative easing.