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Nampak down 13% – a ‘massive, massive fall’

David Shapiro on Chinese PMI, Kumba, Assore, Anglo, Billiton, Mr Price, Imperial, Bidvest and Nampak.

SIKI MGABADELI:  Let’s check those markets. The all-share is down 0.75% at 53 518. The Top 40 is down just under 1%. We saw resources down 2.7% today, offsetting those gains we saw in gold miners. They were up 2.37%. Financials up 0.5%, industrials down 0.66%. The rand is at R15.59/dollar, R22.42/pound and R17.40/euro.

David, not a good way to start the middle of the year.

DAVID SHAPIRO:  There is a bit of hesitancy ahead of Friday’s job numbers in the US and also the ECB meeting. Still a lot of problems. No one is quite sure of Brexit. Trump is coming in and visiting the UK shortly and causing all kinds of ructions and no one is quite sure what that’s going to mean to the market, although I think to a large extent they’ve dismissed it, even if he does become president.

But regardless of that I think markets are still a little concerned. We had manufacturing numbers out today that were positive but not that positive. I think the biggest worry was China, with their PMI just above 50. It shows it is expanding, but not at the level the global economy needs. So I think around the world there’s a similar view.

SIKI MGABADELI:  Is that what pulled down resources.

DAVID SHAPIRO:  That pulled down resources. We’ve seen the iron-ore price below $50/ton, copper price coming down. Gold and platinum picked up I think on the weakening of the dollar. The dollar has had a very, very good run now. It just seems to be easing off a bit. Anglos was down quite a lot, Billiton down a lot. We saw big losses in Kumba and Assore as well.

There is still a lot of action. If I can define what is happening on our markets, away from the global markets we are seeing a lot of local trade – big trade in retailers. Mr Price is up 7 or 8% today, I can’t remember. It was a massive move for a retailer – to see a share like that move, and that on top of gains that it has already been making. So what’s changing sentiment I’m not sure. I haven’t quite grasped it – whether there is a view that conditions are going to change or…

SIKI MGABADELI:  There was a time when everyone was saying that retailers are just massively overpriced if you looked at the different metrics that you used to measure.

DAVID SHAPIRO:  We’ve come off from those, from the multiples of 20 to PEs now of 17, 18. And Mr Price can justify it because Mr Price is probably going to grow 15, 16% next year. So you are evenly balanced. But to see the kind of movements today – a lot of demand.

Imperial is another one, today up 5%, diversifying geographically, also getting away from motor distributorship. You saw the numbers that came out today – motor vehicle sales. So markets responded positively to that.

But over and above that, Bidvest – big, big trade taking place there. So underneath this market trade positioning is taking place. It’s not moving the markets that much because these are not in the heavyweights. The market is influenced by Breweries and British American Tobacco and Richemont and Billiton and Glencore and so on. So these shares which you can term mid-caps or small caps are not really affecting the overall indices. But you can certainly see activity down there.

I can’t not mention Nampak, though. I don’t know if you saw Nampak down 13% today. A massive, massive fall. It came out with results which were good, up 21%. Glass is picking up. The problem is money – and money that they can’t get out of Angola and they can’t get out of Nigeria. So what they’ve done is a lease-back on what they call non-core properties. In other words, going around and having to secure cash to make sure that they can face what they say are challenging conditions ahead. But I think a lot of this has to do with the fact that 47% now – and they brag about it – of their revenue comes from Africa, which is a big number. But [they are] big in Nigeria and big in Angola with tight, tight conditions to actually extract their money there. So they passed on their dividend and the market didn’t like it, and the market really hammered them.

SIKI MGABADELI:  I didn’t notice that – R17.91 down today 13%.

Thanks, David.



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