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‘Hardly anything in the red column other than Hulamin’: David Shapiro – deputy chairman, Sasfin

Strong day for our market, led up by financial shares.

SIKI MGABADELI: A strong day for our market today, led up by financial shares, the all-share up 1.57% at 52 437. The Top 40 index is up 1.73%. The rand is at R12.65/dollar, R19.71/pound and R13.85/euro. So you are seeing a little bit of strength there after some horrid-ish days.

DAVID SHAPIRO: It was very strong, Siki. I thought when China was up about 4% I thought that there would be some impact on the commodity market. But if it wasn’t for a 2% gain in Billiton, and we saw Anglos and Sasol up slightly, it was not such a great day there, as Tumisang said in the introduction.
    Kumba below R100 – I haven’t seen that in ten years. Platinum shares – the platinum price went down $9.50, $9.60/oz. It keeps just plunging, falling, and that took Lonmin down another 10%. You mentioned Royal Bafokeng – first loss since their listing. Just generally a poor day other than the top end.
    But financials and industrials – the commodity market is not having any impact on them. If you had looked at retailers, you would have thought that our economy is in boom [territory].

SIKI MGABADELI: That’s what I don’t get. Is it still foreigners buying or what?

DAVID SHAPIRO: No, it’s local buying, it’s local strength in the market.

SIKI MGABADELI: But everyone tells me they are expensive.

DAVID SHAPIRO: The money is coming in – Woolworths, Shoprite, right across the board retailers are very, very strong. In fact, I always look at the negatives and try and compare them. There was hardly anything in the red column other than Hulamin having a big fall. That’s been under a lot of pressure. And that’s not a big company any more. It has a market cap of no more than R1.5bn.
    But, other than that, a very strong day. What I call the “unloved share” led the way – Arcelor Mittal. Basil Read came up with a good trading update and Lewis – Lewis has been under pressure, with articles in the FM, the FM cover story; a dramatic reading there. You could make a soap opera from that article. See how those chaps carry on. The share price recovered 5%. But it has been battered. No sense of any economic weakness.

SIKI MGABADELI: Looking nice and green, actually. If you look at the banks as well – Standard up 2.7%, Barclays up 2.8%, FirstRand up 3.2%. What did you make of Nedbank’s results?

DAVID SHAPIRO: Very good results. It took the market by surprise. If you go through all the statements, all the sectors, it was really a very, very good performance. Costs are under control, retail banking very strong – making a lot of inroads there. And of course we know that bad debts, impairments are a lot better. We saw that from Barclays. But the good result took the market by surprise. The dividend is up over 16%. I don’t know where they make the money or I know where they make the money but we are not allowed to talk on air about it. We are not allowed to beat the banks up and bash the banks.

SIKI MGABADELI: Why?

DAVID SHAPIRO: Because you pay for everything.

SIKI MGABADELI: Do you think they are going to push up our bank charges if we say what we think?

DAVID SHAPIRO: [Laughs] Bank charges keep going up and up.

SIKI MGABADELI: They certainly do. But I just watch, obviously everybody is watching what’s happening with the unsecured lending, particularly with what’s happened with African Bank and so on, and everybody seems to be pulling back on personal loans and so on, just watching and getting those to a level that’s manageable. And that’s one of the things that Nedbank said – that they are now at a point where they are okay, they are short so there is corporate lending that’s going up, that’s personal loans to consumers being kept under…[overtalking]

DAVID SHAPIRO: Look, overall you can’t fault the performance in a very difficult environment. I always love how the banks say things are really tough, we are really battling, and then they come out with these incredible results. So who is paying for it?

SIKI MGABADELI: And Brent crude? Yesterday it actually went below $50/barrel and I thought, goodness, it’s going to stay below that. What’s pulling Brent down?

DAVID SHAPIRO: It’s just oversupply. A lot more supply is going to come up. And there was a statement yesterday from Iran that they are going to push a lot more oil in as soon as sanctions are lifted. They can put out four million barrels a day – they are a big producer – at a time that Saudi Arabia is also trying to maintain its market share. So you are going to have a stand-off between those two nations. Then you’ve got the frackers who are not letting up at all.

SIKI MGABADELI: Well, they’ve thrown so much money in.

DAVID SHAPIRO: They’ve already sunk the capital, and they just keep producing efficiently. So oil is not looking like it’s going to turn around. That’s good for the petrol price, and it can also be good for the country in the sense that the oil price will fall further – in other words, oil will fall further than commodity prices, so there will still be net positive result for our trade balance here and hopefully for our current account.
    We actually saw very good trade numbers for the second month in a row, and if that can continue it could just stabilise the rand, although no one is really forecasting that the rand is going to make big strides, But perhaps not as weak as the current trend suggests.

SIKI MGABADELI: But I suppose this week a lot is going to hang on what we see from the jobs numbers out of the United States later in the week.

DAVID SHAPIRO: Look, the outlook is for over 200 000. I think anything of that number, where it’s 225/230/240 000 still means they just continue to add every month. I know wage growth is a big problem.

SIKI MGABADELI: But it’s also the big thing that the state is watching that’s going to swing…

DAVID SHAPIRO: We want them to spend more. [They] are not spending enough. That’s why the global economy is not kicking in.

SIKI MGABADELI: Yes, Americans are strong. You are going to visit them soon. …

DAVID SHAPIRO: With the rand at R12.60

SIKI MGABADELI: Tell them you can’t afford to be there.

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