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Market watcher: David Shapiro -Sasfin

Dollar under pressure; money into gold.

DAVID SHAPIRO: We seem to be…

DAVID SHAPIRO: Trend busters.

SIKI MGABADELI: The all-share is up 0.75% at 50 711. But look at the euro. The FTSE down 1%, the DAX down 1.8%, the CAC 40 down 1.6%. And in the US those markets down as well, the Dow down just over 2% and the S&P down 1.7%.

DAVID SHAPIRO: We were up 0.75% and all sectors did well – other than industrials under a bit of pressure.

SIKI MGABADELI: …What’s happened?

DAVID SHAPIRO: I think a lot came from banks and from the gold market. The gold market, interestingly enough, picked up. Yesterday we had a poor day on the gold market. Gold shares came down, the gold price came down on the Greece story – the fact that they want to stay in Greece.
   Today it reverses and goes up largely on what’s happening in the United States. Durable goods orders there fell – I won’t go into the detail of that – but that’s heavy machinery and aircraft and so on. So the demand for that. And also we had poor results from Caterpillar and Microsoft.
It caused a little bit of a stir. The dollar came under pressure, money then flowed into gold – in fact, the euro picked up with all the troubles we are having over Greece and the worries about Draghi. The euro picked up above $1.13. Strangely the rand depreciated. Normally if the dollar goes down, the rand benefits. But we went the other way.
   So I think gold – a higher gold price together with a weaker rand; the combination lifted gold shares quite dramatically. We made up all the losses of yesterday – Harmony, AngloGold, all of those having very good days. Platinum shares also picked up.
   Then the banks – I’m not sure…

SIKI MGABADELI: What’s going on with the banks?

DAVID SHAPIRO: I don’t know. I looked for stories. I think there was a lot of volume in banks today.
   It was a big day, R17bn plus. The two biggest traders were Naspers and second came FirstRand. FirstRand up about 3% today on big volume. But I can’t attribute it to any particular fact. There is nothing that I could find that drove bank shares.

SIKI MGABADELI: We’ve got the MPC meeting – I’m not saying that’s got anything to do with it. But expectations generally are that we are going to see a hold, do you think?

DAVID SHAPIRO: You know where it might be? It might be that if retailers are going to start improving, we expect to see better sales numbers coming out because of lower oil prices. It might be saying well, if you are going to buy retailers, a lot of the transactions are through banks, and they will also benefit from increased transactional banking and [we should] maybe buy banks. Also less pressure on bad debts because people have more money and so on. There might be a feeing that banks are cheaper than retailers – let’s go for banks. That’s probably the cheapest, safest area to go into at the moment. Capitec another all-time high, another 2% up today – I think not only on its prospects but also perhaps being included in the Top 40.
   Those were the two major sectors. The rest were ups and downs.

SIKI MGABADELI: Your view on Naspers? We were talking about it yesterday. And yesterday another all-time high. And there was a piece on our website talking about whether, for those who may not have gotten in when it was cheaper, Tencent is the way through.

DAVID SHAPIRO: We say buy high, sell higher. It’s our only entry point into the Chinese consumer. That’s actually growing because a lot of the products that Tencent offers are generally global, like WeChat as opposed to WhatsApp. In fact I think WeChat is bigger. You are going to get very good revenues from advertising, mobile advertising. So there are quite a few areas there. The e-commerce side will pick up. But it’s generally a very well-run company with easy access into the Chinese market, together with Alibaba, Baidu. I think those companies are starting to attract a lot of interest. So if you look at the various products that Tencent offers in e-commerce, in mobile, in a place which is really well recognised today or well used, I think you can see this company growing. It’s one of my favourite companies.

SIKI MGABADELI: Let’s go broad. Big talk of course has been about Greece – what they may or may not do, the tough talks that they are going to have to have with their lenders, the banks, and who is going to blink first.

DAVID SHAPIRO: I don’t think anything major is going to come out of this. I don’t think the new party, Syzria, will be any different. If they do try and negotiate, if they do come to some kind of terms, I think there will be a moderate improvement in the terms. But I think a lot of the promises that they made to their voters are not going to materialise. They just can’t. They haven’t got the money to do so.

SIKI MGABADELI: And when you’ve taken out a loan you’ve got to pay it.

DAVID SHAPIRO: If they keep pushing it further what will happen eventually is credit will be withdrawn from them. They might then have to leave the euro, create their own currency, and money will flow out. All it will do is increase their hardships. So I think the market has basically brushed this aside, not taking it too seriously, otherwise the euro would never have improved today.

SIKI MGABADELI: The way that it has. Also in the United Kingdom they had their preliminary GDP data. That economy looked like it was out of everybody else…

DAVID SHAPIRO: They are still going to do pretty well. They were slightly down, markets were down, because they are slightly down on the last quarter, which was up 0.7%. They were up 0.5%. I would imagine there would be a slowdown. A lot came from construction. And also I don’t think it’s an economy that can thrive if its neighbours are not doing that well.
   And in fact it applies to the US as well. I think a significant result that we have to talk about is Caterpillar, which came down in the US. Disappointing, largely because we’ve already seen a pull-back in mining projects and now we are going to see a pull-back in oil projects because they sell heavy equipment.

SIKI MGABADELI: They see them as a bellwether, really, for that sector.

DAVID SHAPIRO: That’s why if you looked at Barloworld it was down about 4% today. In fact the whole construction sector just came back together with Barlows and that was one of the weak points of the market today. But of course Barloworld operates in Iberia, which is Spain, Portugal – and also in Siberia in Russia. And of course with Russia under pressure as well there are worries. That’s where their agencies are. And South Africa. We sell into Angola. In Angola the oil price coming down. … That’s why Barlow was down today.

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