Basil Read reflects precarious SA construction sector

Kumba, Assore, Glencore, Anglos, Billiton, Barclays, Spar, Basil Read and PPC – David Shapiro on Thursday’s market moves.

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

Let’s check those markets. The all-share is down 1.35% at 52 840. The Top 40 is down 1.4%. The rand is at R12.97/dollar, R16.69/pound and R14.53/euro. The gold price is at $1 263.75/oz, platinum at $929.56/oz and Brent crude at $51.39/barrel.

David, you were busy selling – gold miners down, financials down, industrials down, resources down.

DAVID SHAPIRO:  Resources were under a lot pressure. I think a lot has to do with what’s happening in China. A private survey of manufacturing came out negative. It’s a much smaller survey than the official one. But I think, even after yesterday’s manufacturing number, there are still concerns that China is perhaps going to slow down – or manufacturing is going to slow down. Growth may be offset by the services sector. But there are concerns that demand will slip. This has translated into much weaker metal prices. Iron ore has come down dramatically, having been $90/t a few months ago – or not even a month or two ago. We are now at $55/t. So Kumba is under pressure, Assore under pressure. Copper is also in a down channel. The oil price was steady today but we know it was knocked yesterday.

We’ve seen our miners under significant pressure, led today by Kumba and Assore down, as well as gold and platinum shares. And then all the top miners – Anglos, Billiton, Glencore – under pressure.

I was surprised at the rest of the market. Why I say that is if you look at our PMI – there was a rebound. Fitch reaffirmed their rating.

SIKI MGABADELI:  We still have Moody’s, and S&P tomorrow.

DAVID SHAPIRO:  The rand held its ground despite the fact that Barclays paid R38 billion– that’s got to go out of the country. I don’t understand markets and I think the longer you stay in the market the more dumb you realise you are.

SIKI MGABADELI:  You can’t say things like that!. The listeners think you know everything [laughing].

DAVID SHAPIRO:  When they sold it, when I saw the numbers going through I thought that R38 billion is going to leave within the next three days and it’s going to put pressure on the rand. But the rand has gone stronger. The deal might have been done ahead, whatever – I can’t explain why the rand strengthened. But nevertheless I think Barclays was one of the few shares that did improve.

Read: Barclays Africa to ‘determine own destiny’

But overall, Siki, there was a lot of pressure all round.

SIKI MGABADELI:  Those retailers remain under pressure.

DAVID SHAPIRO:  Spar – we spoke about Spar yesterday. It scared investors. Down 6% on top of yesterday’s fall, so that came under pressure. Woolworths, Shoprite – generally across the board a lot of weakness. Weakness in financials, weakness in construction companies. Basil Read, which used to be a big company and is now a tiny company came out with a trading update that exposes just how weak and difficult construction is in the country. PPC was down today, and ArcelorMittal took a bit of a knock.

So it wasn’t a good day for our market. We fell, the all-share having been well above 54 000, heading towards 55 000, is now below 53 000. So not a great day on the market.

SIKI MGABADELI:  Barclays up.

DAVID SHAPIRO:  Look, they placed a lot of shares. They placed them at R132, and the share is now R144. So for whoever’s got them there’s a nice little kicker there. It just shows you, there is demand, there is still a lot of cash around.

Global markets are doing pretty well.

SIKI MGABADELI:  Let’s talk about that, because tomorrow there are the job numbers. There are a lot of people watching the ECB, for example, what’s going on there. So what’s happening on global markets?

DAVID SHAPIRO:  European markets steady. A fairly good day in European markets. US markets – the last I looked they were heading towards new highs again. They are ratcheting up in decimal points. It’s not as though they are screaming up, they are just ticking up now.

There was good news on [US] manufacturing, and also good news in a private salary survey which showed – I can’t remember the number – a huge number of new jobs created. It’s going to be a high number. I think there’s an estimate of another 180 000 new jobs having been created in May. So it’s a good number.

Overall on the global scene things are very positive so it’s surprising that we took a knock against that kind of backdrop.

SIKI MGABADELI: Thanks, David. We’ll leave it there. David Shapiro is with Sasfin.



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