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Brazil’s real impacts emerging currencies

Market indicators, rand, AB InBev, BAT, Naspers, Richemont, Steinhoff – 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 the markets. We ended up despite what we saw overnight in the United States and in Asia this morning. The all-share is up 0.33% at 54 197; the Top 40 index is up 0.5%.

The rand is at R13.41/dollar, R17.41/pound and R14.92/euro. The gold price is $1 255.10/oz, platinum $936.15/oz, and Brent crude at $52.54/barrel.

David Shapiro is with Sasfin and joins us now. Hi, David.

DAVID SHAPIRO:  Hi, Siki. The rand’s a big story today, trading at R13.44/dollar. I know the weakness came as a result of a move out of emerging markets. But Brazil’s also under quite a bit of pressure – with the government crisis there. The real, the last time I looked, was down about 5%, so I’m sure that had an impact on all emerging currencies, the rand included. So that did give our market a bit of support. It gave us a little bit of a lift.

Overall, European markets were down a well as the FTSE, the UK market down. I’m trying to make sense of the UK market because Theresa May announced her manifesto for the upcoming election, and she promised a hard Brexit – in other words, full withdrawal from the customs union and the single market in euro. I think markets are taking negatively to that.

So we saw quite a few of our shares down in the UK. I’m trying to pick up the reason why AB InBev came under quite a bit of pressure, British American Tobacco also under quite a lot of pressure. So it did have some impact on our industrial shares.

SIKI MGABADELI:  Like you said, there is a lot of politics going on. In Brazil you’ve got the allegations of bribery against the Brazilian president trying to bribe officials involved in last year’s impeachment of the former president.

Then you’ve got Donald Trump and what’s happening with his administration at the moment. All of that is playing on the currencies. Any impact on commodities? Did gold take any heart?

DAVID SHAPIRO:  No. In fact, we saw a little bit of a rebound in US markets. It’s not holding. There was an early rebound. Just looking at it now, it seems to be flattening out. But I think the fact that it’s steady took the edge of gold and platinum. And commodities [are] worried about global growth – concerns about global growth. We saw copper and most of the minerals down. So a mixed picture. It’s hard to just put one line through what happened on the market. It’s all over the place.

I think on the positive side if you look at the Top 40, which is not necessarily made up of shares like Glencore and British American Tobacco. Those have got very low weightings – in fact AB InBev hasn’t got any. But Naspers is massively up. Naspers was up on the back of Tencent, and that had a big impact here.

And also we saw a bit of kick-up in Richemont up in Switzerland. That with the weaker rand here had some uplift effect. And then of course Billiton and Anglos were pretty strong.

So I think that was the underpin of our Top 40. Steinhoff

SIKI MGABADELI:  I was going to say: Steinhoff is back at it. What do you make of this? [Potential listing of Steinhoff’s African retail assets on the JSE.]

DAVID SHAPIRO:  I don’t know. I’ve got my views. I just wish they would stick to a strategy because every second month there is something new. From an analytical point of view it makes it very difficult to analyse the business and put values on it.

SIKI MGABADELI:  The structures become tied up and more difficult to unpack. Isn’t that so?

DAVID SHAPIRO:  I think that’s the problem with them. I don’t mean that any deal they are doing is going to cause problems, but it’s very difficult to put values on them. So that was also one of the features today.

Retailers are under a bit of pressure still. We are still seeing a selloff of SA Incorp stocks, of our retailers, although Dis-Chem turned around after their results. They were down yesterday, but seemed to steady today. Banks are also up.

SIKI MGABADELI:  How did Investec do?

DAVID SHAPIRO:  Okay. I went through the results. Not taking anything away from Investec, I think it’s very hard to be in financial services globally now. It’s very, very difficult in a low-interest environment. Also with economies under a bit of pressure they are not booming, so you are getting a lot of corporate activity. So it’s a very tough area to be in. I know they are going into insurance now, life insurance and that. But they are perhaps trying to combat some of the competition that will come from Discovery. It’s hard for them. it’s certainly an acceptable result, but in a very difficult environment, and it’s not going to get easy.

Remember, a lot of these banks used to trade their balance sheets, and that was where they made their money, trading. They’re not allowed to do that. Regulation has clamped down on them after the financial crisis. So banks are not as much fun as they used to be.

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

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