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03 February 2011 23:11

Market watcher: David Shapiro - Sasfin

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Alec Hogg is a writer and broadcaster. He founded Moneyweb

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    ‘Foreigners are still very interested in … MTN, Vodacom.’

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    ALEC HOGG: Hello, good evening and welcome to the SAfm Market Update with Moneyweb. I’m Alec Hogg.
        The first chief executive from the construction sector puts his head above the parapet tonight. We’ll be chatting live to Aveng’s chief executive, Roger Jardine.
        Also coming up in the next half-hour Zimbabwean media owner Trevor Ncube ponders on whether the social media-led revolution in Tunisia and Egypt could happen in his home land. We caught up with him in Harare earlier today.
        And then we'll have financial results from Optimum Coal, whose chief executive Mike Teke can tell us whether Eskom is making too big a deal about not being able to have enough coal from the South African market.
        David Shapiro from Sasfin is our man in the studio. More green ink for us today, Dave.

    DAVID SHAPIRO: Ja. Two days in a row. Alec, a 1% gain. It's surprising if you read it against the escalating violence in Egypt. But I'm not sure what we can read into this, whether or not markets are saying this is not going to have too much effect on the global economy, or that it will soon be sorted out. I'm surprised at how strong we were although, to be fair, Alec, I think a lot of the gains were made on the back of a fast-weakening rand and also higher oil price; copper price also up. So that’s where the strong gains were.
        But there were still some good features in the industrial and financial markets as well.

    ALEC HOGG: Really our rand-related stocks that did well – Naspers nearly 4%, same with ArcelorMittal, and Sasol of course 2.5%. There’ll be a lot of investors very happy to see that Sasol’s now broken above the R360/share level, and I think Inzalo investors at last…

    DAVID SHAPIRO: Ja, breaking even. It's been a long stretch, but that price is going to go higher. No doubt about that.

    ALEC HOGG: The way the oil price…

    DAVID SHAPIRO: Also, Alec, what's interesting is that we panic about the rand and we suggest that the Reserve Bank start taking some kind of measures or exchange control starts taking measures, and here you are – here we are weakening for reasons that are beyond our control as investors start to flee emerging markets back to the safe haven of the United States.

    ALEC HOGG: I don’t think you and I are ever going to agree on this story, David.

    DAVID SHAPIRO: Which one?

    ALEC HOGG: My feeling is that the rand should remain as strong as possible because the man in the street then doesn’t have inflationary pressures, and we don’t have to pay more for things – like petrol! You are just interested in the exporters making more money.

    DAVID SHAPIRO: What I am saying is that there's a lot of pressure from Cosatu and lot of pressure from other organisations to weaken the rand, and I'm saying, “here you are, it's weaker without taking any action”. I agree with you. You know what's interesting? Look at our manufacturing numbers yesterday, which were so strong at a time when the rand was very positive.

    ALEC HOGG: David, there was an apparently smart person whom I will call a fool and an idiot, who said South Africa should start quantitative easing – in other words, we should start printing money like the Americans to weaken the rand. How absurd is that in the current situation? Imagine if we’d done that – we’d have had inflation and a weaker rand, as it happens, at the moment. The markets tend to sort these things out, as you have well said, Mr Shapiro.

    DAVID SHAPIRO: Ja.

    ALEC HOGG: Just to have a look at the other side of the balance sheet – good move for the exporters today. I also see Vodacom again – another good day after a trading update yesterday pushed the shares about 4%. It got another 3%.

    DAVID SHAPIRO: I think that surprised the market. No-one believed that they were doing that well, doing well in data, doing well in advancing their subscribers. So I think it took the market by surprise. We saw a number of broker upgrades today, and I think that’s reinforced the market. It's one area in which foreigners are still very interested in our shares. MTN, Vodacom are still top favourites there.
        Naspers, on the back of gains that we've seen in Tencent and its underlying investments in mail.ru…

    ALEC HOGG: And the rand, David.

    DAVID SHAPIRO: And the rand, sure. But the rand’s also had a big influence. But it's underperformed some big moves in those, so playing a bit of catch-up. Still very strong, though.
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