Kumba continues to fall: David Shapiro – deputy chairman, Sasfin

Retailers are starting to take strain as we go into December.

SIKI MGABADELI: Let’s check those markets now. Flat on those markets. I think we started slightly better but ended in marginally negative territory. The all-share is at 51 535. The rand is at R14.43/dollar, R21.72/pound, and R15.32/euro. Gold is at $1 065.98/oz, platinum at $839.37/oz, and Brent crude oil at $44.66/barrel

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

DAVID SHAPIRO: Siki, ja, the market’s flat for the second day in a row. But if you look beyond the market into each sector, a lot of movements on both sides of it.

Chinese manufacturing I thought might bring further weakness to the mining markets, but they held pretty steady. Billiton was up about 3%. And, reading through analysts’ reports, they reckon that while the collapse of the dam in Brazil might bring reputational damage or challenge their operational reputation, it won’t affect their progressive dividend. So the shares picked up 3%. I cannot reconcile that in my mind but I’ll go along with them; it picked up after yesterday’s fall.

Lots of bribe stories today. Standard Bank fined $33m in the UK by a London court for bribing a Tanzanian for whatever reason – over a contract.

Then we had British American Tobacco also being accused by the BBC of bribing the government or parliament members there in Rwanda, Burundi and the Comoros to try and influence tobacco legislation. They deny it vehemently. Everything’s happening up in Africa.

Just back to mining shares, Kumba continues to fall – under a bit of pressure – down about 4% today. There again, worries about what an iron-ore price around about $42, $45 is going to mean for the future of the company. It’s going to put them under severe pressure.

And then Famous Brands held up well. When I read the statement on Sens I thought ah, no, don’t come when we are all trying to get performance. It’s a share in my portfolio. I love Famous Brands – do we have to come with this news now? It held up pretty well. It was only down 0.2%. So interesting. I thought Kevin Hedderwick has been the driving force around their drive and around their success. I thought there might be a reaction. But obviously a lot of faith in the successors.

SIKI MGABADELI: We’ll be chatting to Kevin a little later. Maybe he will tell us a bit more about his successor as well. But I think he’s had 15/16 years at the helm of this company.

DAVID SHAPIRO: He’s done incredibly well.

SIKI MGABADELI: What they’ve done with the business has almost become the template for how franchising is done in the country.

DAVID SHAPIRO: He has built up a manufacturing, logistics, supply-chain business. He supplies all the franchisees with product.

Just on another note, the PMI came out and there is a bit of concern creeping into the market here about the SA economy. We’ve seen banks under pressure today, we saw construction shares take a hammering and even retailers now are starting to take strain as we go into December.

SIKI MGABADELI: Certainly. And there are jitters of course about what we are going to hear from Fitch and Standard & Poor’s. I think many people are saying, look, they don’t see junk status but maybe the outlook is negative. We are just above there. So the concerns are mounting, though, because you also saw the deficit data out yesterday, and the rand at R14.43/dollar.

DAVID SHAPIRO: So you’ve got the PMI, you’ve got the trade deficit, you’ve got a drought, you’ve got falling commodity prices. It’s like the perfect storm. Poor old Nene is going to try and get his way out of this – it’s very, very difficult. But it is impacting on the market. We seem to have hit the 50 000 level and not much is happening beyond that. There is nothing to get us excited and to get us buying the market.

SIKI MGABADELI: And typically how do we normally start the last month of the year? Kind of winding down and…

DAVID SHAPIRO: Not really, because we’ve got a lot happening this week. You’ve got Draghi I think on Thursday, to give us some indication of whether he is going to introduce further stimulus there. I think it’s in the market already.

SIKI MGABADELI: What’s the stimulus doing, though, for them, for Europe?

DAVID SHAPIRO: Nothing. It’s not doing much. It’s just playing for time. They need structural reforms, but that’s the subject of a whole number of programmes.

Then we’ve got Janet Yellen talking as well, to give some indication – everybody looking for hints whether they will raise rates or not. It’s almost 100% in the market, but there is an outside chance that she might not do anything.

And we’ve got Opec as well, which also could have an influence on the market. I think a lot of it is already in the market. No one believes that Opec is going to do anything – oil prices remain at the low $40s. I think it’s priced in that Yellen will raise rates and that Draghi will introduce further measures to stimulate the economy. So that’s all in the market.

Then we’ve got job numbers on Friday as well, which are also going to be a big number that everybody will be looking at.

SIKI MGABADELI: So we just want this week to end.

DAVID SHAPIRO: It is a fun week.

SIKI MGABADELI: How is it fun?

DAVID SHAPIRO: Because there’s lots of volatility, lots of movements. But I think beyond that there are a lot of concerns about what’s happening and how we are going to turn this economy around. It’s something that we have to do from inside, because outside forces are not helping. It’s beyond our control. The only thing that is in control is to mine more efficiently or operate more efficiently and keep costs under control.

SIKI MGABADELI: I just ask about December because obviously we are entering the festive season and things start to slow down; but this is a time when we do expect consumers to be going out. But when you look at the retail sales data and we saw yesterday PwC’s report – there was like no one going shopping.

DAVID SHAPIRO: No. And it’s such a reflection of here. On the other hand, we are all watching – we watched Cyber Monday. We are waiting for the numbers. I’m not sure whether they are R3bn or R6bn. That’s a big difference. But I’ve heard various reports. But why I bring that up is that if we compare that number with China, with Singles Day at Alibaba, which is $14bn, this gives you an indication of just how powerful the Chinese consumer is and how big that nation is. And when they start spending they do it to the power of ten.

SIKI MGABADELI: The power of numbers.


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