Market watcher: David Shapiro – Sasfin

‘We are not going to get it better than it is now’ – with oil prices and interest rates.

SIKI MGABADELI: We are talking markets now with David Shapiro of Sasfin. The all-share up on the day by 1% – the same with the Top 40 index. The rand is at R11.60/dollar, R17.46/pound and R13.67/euro.
   David, another positive day on the market.

DAVID SHAPIRO: We’ve nearly recovered our hangover which started last Friday, I think, on January 2.

SIKI MGABADELI: People are coming back from holiday.

DAVID SHAPIRO: We are nearly back to December 31. So the big fall that we saw on Monday, the 3.5% – we’ve virtually recovered that. So all sectors are doing nicely.
   I think what’s driving the market is the view that central banks are going to continue with stimulus measures. Siki, we are not going to get it better than it is now. We’ve got a lower oil prices, and we’ve got lower interest rates. What more do you want in an economy? I reckon that when we finally realise it and it filters through the global economy, we are going to have a much better market. We’ll get rid of all these geopolitical issues, all these other disturbances.

SIKI MGABADELI: Our central bank meets at the end of the month. We are not expecting anything.

DAVID SHAPIRO: They can’t do anything in this kind of environment. And certainly inflation should be falling quite a lot now with petrol prices coming down. And globally we are faced with deflation or disinflation – disinflation means a lower rate of inflation; deflation means it’s actually going negative.

SIKI MGABADELI: And those US Fed minutes out last night – again I think pouring cold water on those expectations of an imminent interest-rate hike. It goes to what you were saying yesterday – there is no inflation problem.

DAVID SHAPIRO: No, no. So if anything there is no pressure on them to push up rates. There is still speculation that the US might begin because of the strength of the economy. We are going to see the job numbers tomorrow; unemployment could be coming down even further. Evidence is pointing towards that. They may do something in April, but it’s not a certainty and there’s no pressure for them to do it prematurely if they don’t really feel that they have to, especially in this global environment. In any case, even if they do, it’s really normalisation and I don’t think the markets will necessarily react to it in a very negative way. There may be a knee-jerk reaction.
   But a lot is happing on our market, there is still a lot of movement.

SIKI MGABADELI: Sasol below R400.

DAVID SHAPIRO: I know, I know. You know why? It’s because too many commentators here have been choosing it!

SIKI MGABADELI: And another one today. It’s really exactly the same.

DAVID SHAPIRO: They are just guessing. In fact, there is quite a bit of money flowing into global oil funds I think on the belief that oil won’t be here in a year or two’s time. It will be much higher, it will pick up. But the evidence is not there yet.
   While Sasol is coming down, we had another big movement in Naspers.

SIKI MGABADELI: Ja. They had a very nice recommendation from Goldman Sachs for Tencent.

DAVID SHAPIRO: That’s only one of a number that are coming out now, recommending Tencent.
   And then the star of the show today was Aspen. It was [up] about 5.5% for reasons that no-one can establish. They are at R431/share, which is another all-time high. I searched and searched for a story. Bloomberg phoned, everybody was phoning – what’s the story, what’s the story? No-one knows. But there was plenty of volume behind it. It wasn’t just on short volumes. If it comes out I hope it’s not a story that we don’t know about and a few insiders do. It might be that someone has recommended it, that it is a favoured stock.
   But very, very strong movements and broadly retailers still of the view again, on the back of oil prices coming down, petrol prices coming down, that consumers are going to have more money to spend. We are waiting now for year-end sales, the Christmas sales, for retailers to give us some kind of clue of what they did at year-end.

SIKI MGABADELI: That will help us to ascertain what’s going on.
     We’ve got money flowing into the banks as well. The index was heading towards record territory today as well.

DAVID SHAPIRO: I think with nowhere else to go banks should be doing well. They always do well. There is a generally positive feeling that you’ve got to be in, or you should be in equities for the reasons I mentioned – lower oil prices. Where else are you going to go? Look, if inflation does come down it doesn’t mean that interest-bearing stocks, particularly government stocks, are necessarily bad because it means that your real rate will go up. But still I’d far rather be in equities than anywhere else.

SIKI MGABADELI: You know, I haven’t got your stock pick for 2015.

DAVID SHAPIRO: I wish I had one – one that I felt was going to shoot the lights out. I just don’t get the feeling. I’ve been very boring for the last few years in the portfolio that I administer, just going for the same kind of shares, those big offshore giants –SAB and British American Tobacco. I’m going to stick my neck out and I’d probably say I’m going to go for something like the db x EURO. Oh, Mohammed had that – so I’m not going to take that away. Ignore that. I’ll think about it.

SIKI MGABADELI: I’ll remember before six-thirty.

Postscript:

DAVID SHAPIRO: you know what, I am going to take Richemont, particularly because they’ve come to about R101. But remember the euro is falling and it’s going to fall even further. That means the cost of producing watches is going to tumble, it means you are going to afford them or they are going to make bigger margins. So I think European manufacturers are going to do very well, particularly the drug companies, motor-car companies, because of falling costs. Plus they sell into stronger currencies like dollars.
   So I’m going to take luxury goods company Richemont. It hasn’t done anything for about two years.

SIKI MGABADELI: We’ll watch it.

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