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Impala shares plummet, ending down over 9%

Market indicators, Impala, Lonmin, Tiger Brands, Wall Street, US interest rate – Maudi Lentsoane 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 at 54 028, down 0.5%. The same with the Top 40 index. The rand is at R12.85/dollar, R16.61/pound and R14.40/euro.

A bit of a mixed picture on the commodities front. The gold price is at $1 256.93/oz, platinum at $952.74/oz and Brent crude at $52.90/barrel.

Maudi Lentsoane is MD at Lehumo Capital and joins us now. Maudi, thanks so much for your time today. I suppose the trend was clear from the morning, because we saw muted trade ahead of the Reserve Bank’s decision a little earlier, and then we ended down 0.5%.

MAUDI LENSOANE:  Good evening, Siki, and good evening to your listeners. Do you know where I want to be, Siki? I want to be in the US. A record close. Right now it seems like it’s quite exciting there. When you come back home, domestically there is nothing exciting. You are seeing volatility in the markets. We’ve seen the volatility. Just look at the platinum space – Impala, goodness me, down 18% at some stage. It has recovered somewhat, but it’s still just above 9% lower. There seems to be a competition between Lonmin and Impala.

SIKI MGABADELI:  Exactly. But just explain this to us – they’ve got a $200 million convertible bond that’s falling due in February next year, but today they are unveiling plans to raise $450m in a convertible bond that’s due to roll over next year. So what’s going on there with Impala?

Read: Impala Platinum offers R6.4bn in convertible bonds

MAUDI LENSOANE:  That particular bond is due, as you said, for renewal, and times are tough. Obviously they’ve had to rely on those bonds issuances to just stay afloat, given that they are not really making money with the platinum price at these depressed levels. Unfortunately that particular bond is now due to be renewed, and it looks like they are going to have to renew it at a massive discount. And it’s that particular discount that is really putting a lot of pressure on the share price that we saw today. And 9.7% [down] is where it closed, which goes to prove that times are tough in the platinum space.

SIKI MGABADELI:  Absolutely. And Tiger Brands came out with their results today. It looks like they are making headway, trying to get out of West Africa.

MAUDI LENSOANE:  Licking their wounds. They went into Africa and Nigeria was the first place, where their timing was terrible. They are coming back licking their wounds. They were in Kenya as well, from which they are also divesting. It’s really tough.

There is this big story about Africa, and unfortunately if you get it wrong you will really come back and lick your wounds. They had to let go of that operation in Nigeria, sold it back to Dangote. The same story in East Africa. It hasn’t been that great for Tiger Brands. They are doing the right thing, which is come back home and hopefully they will get a little more love here at home.

SIKI MGABADELI:  [Chuckling] Let’s go where there is happiness. What’s going on with the mood on Wall Street? What’s driving that?

MAUDI LENSOANE:  The mood in Wall Street is driven by one thing. Just the fact that when you look at what happened last night with the minutes from the Fed, I think somewhat of a dovish statement from The Fed. Yesterday the acknowledged the fact that they are still going to continue to raise interest rates. However, that process will be only a very gradual on. So we should think of the US economy that’s, yes, improving, but not to a level where we will see an aggressive interest-rate hike. We are still going to see it at a gradual pace. I think a lot of focus was also on the Fed balance sheet, which they say they’ll be unwinding at a gradual pace. So the focus is the fact that there isn’t really much in terms of the opportunities. We are sitting in a low interest-rate environment and the equity market just seems to be going higher and higher.

But I’m a bit nervous. There is no news, really. There is nothing new. And we are just going higher.

SIKI MGABADELI: Thanks, Maudi. We’ll leave it there. Maudi Lentsoane is MD at Lehumo Capital.

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