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Market watcher: David Shapiro – Sasfin

Chinese authorities to fast-track over a trillion US dollars of infrastructure projects.

SIKI MGABADELI: We are talking markets now with David Shapiro of Sasfin. The all-share up 1.6% at 48 598. It’s off the 52 000 we were seeing in September. But, hey, we’ll call anything that looks green good at this point.
   The gold price is at $1209.80, up 0.5% on the day. And you can see that with some of the major moves up today. Randgold up 12%. Harmony up 11% on the day, AngloGold Ashanti 6.8%, Gold Fields up 8.7%, Sibanye Gold up 8.4%. Gold shares, David?

DAVID SHAPIRO: Ja, they are up with the gold price, I think. Hugely volatile, with equity markets down, also the worries about Greece. As you mentioned, gold has picked up and there has been a flurry for gold shares.
   It wasn’t only gold shares today. I think another big story that pushed the market up was views that the Chinese authorities are going to fast-track over a trillion US dollars of infrastructure projects. So the iron-ore price picked up. Also I think iron-ore stocks reportedly are at an 11-month low. So iron-ore prices are firmer. Kumba was up. And generally miners had a good day.
   Sasol unfortunately kicked off its bottom. Ended up above R400, but still down on that lower oil price. There doesn’t seem to be any stopping of the oil price.

SIKI MGABADELI: The big story obviously last year was that last Opec meeting. People are wondering what they are going to be doing at their next meeting. You’ve seen Russia and Iraq saying, look, we are just going to push out our oil.

DAVID SHAPIRO: Western Africa, Latin America, you name it, America, Canada – everybody is pushing more and more oil onto the markets. What concerns me, and I say this in a positive way, is that I think we are reflecting the negative side of oil falling. The positive is that you are going to have a lot more money to spend because I think oil is a big part of our consumption, particularly in South Africa. But globally it’s going to mean a lot more for people to spend – China, Europe, India, America. So I don’t think that side has been factored in. It might take a little longer for it to filter through to personal wallets, but I think that’s going to be one of the big drivers of the market.

SIKI MGABADELI: And I think for us as well when you look at the inflation situation – very concerned about that. And when we’ve got a weakening rand one’s got to worry about the balance…

DAVID SHAPIRO: I think inflation should come down quite dramatically. It’s not the complete basket, but it think it does contribute meaningfully. You heard Mike Schüssler last night. I think our big fear is that the government might say, listen, we’ll keep some of that. Maybe it’s OK, maybe it stops them raising taxes in other areas if they can recover it on the petrol tax. Maybe that’s a nice way, rather than raising VAT or raising income tax or raising capital gains/dividend tax and other means, because we know that taxes have to be raised. But overall, net-net, I think the oil price coming down to these levels has to be seen in a positive light.

SIKI MGABADELI: Well, lots of talk continuing around what the ECB may or may not do. Again a big debate about what Greece is going to do. I suppose we just have to wait to hear what Mario Draghi actually does.

DAVID SHAPIRO: Well, they’ve started electioneering in Greece. The elections are I think in late January, January 25th, and the current government is trying to hold power by creating fears that if the opposition comes in it will lead to an exit [from the euro]. So they are using that as an election strategy. But no-one really knows what’s going to happen.
   Nevertheless, the data coming out of Europe at the moment is still very weak and I think creating worries. And the one thing that governments don’t want is deflation because we are used to inflation. We are used to believing that our money is going to lose value when your money gains value by not doing anything with it. I think that creates a lot of problems for any economy. So that’s the big fear. But we haven’t heard – we’ll hear shortly what he is going to do. Whether he has got the means, whether he will get the backing of Germany also leads to a lot of speculation.

SIKI MGABADELI: And any specific shares you are going to be watching? Obviously we are going to do our stock pick with Nkareng, and she’s into Naspers and Bidvest. We are going to talk about that a little bit later, though.

DAVID SHAPIRO: I like Naspers. It reached a new high today. Tencent has been granted a bank licence in China. I haven’t seen the full report on what kind of bank licence it is, but that is a big story. Generally e-commerce in China is a very big story and one of the themes I think being pushed in 2015 – Alibaba and other companies. It’s very much part of Chinese retail strategy. You haven’t got rolling malls there. There are not enough shopping malls in China, so you do tend to find people using the internet as part of their shopping experience. I think Alibaba accounts for 50% of parcels distributed in China. So against that I like Naspers, and I don’t think it’s time to get rid of it at all, despite the fact that it’s been one of the best performers of last year.

SIKI MGABADELI: We are going to talk about that. I spoke to someone yesterday who said they see it definitely going above R2000/share and possibly staying there. We’ll see what happens.

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