Market watcher: David Shapiro -Sasfin

The big features today: foreign-listed industrials and some financials.

SIKI MGABADELI: It’s just been, really, a sideways trading day on the markets. The all-share is flat at 52 109, the Top 40 index also flat. The rand at R11.69/dollar, R17.77/sterling, R13.23/ euro. And the picture on the metals front – gold $1 237.55, platinum $1 215.44. And Brent crude at $57.87/barrel.
   David Shapiro is with Sasfin and joins us now. Hi David. It feels a bit strange talking to you from the other side of the world.

DAVID SHAPIRO: Shush, because I can’t see the hand signals!

SIKI MGABADELI: How am I going to tell you to keep quiet?

DAVID SHAPIRO: One thing I have to say, it was far from flat. We opened up this morning, we roared way beyond July’s all-time high. I think the driving story early on in trade was Chinese CPI numbers that came out, in other words, inflation numbers came down, which had dropped dramatically, and there was a fear that falling prices there were driven by falling demand. And therefore investors felt that the Chinese would institute further stimulus measures. And the market went up on the basis of that. But it didn’t last long.
   So for the first hour we were up at all-time highs, and then fell as the day progressed and made a little bit of a comeback right at the end, to end flat. A lot of volatility if you were an intraday trader today, with lots of movement in all the different sectors.
   But I think the one thing that defined us today was the rand, which is at R11.71/dollar – and I hope it wasn’t something that was said at the mining summit, and we can blame it on the Greeks.

SIKI MGABADELI: I think blame it on the Greeks. Let’s do that, because we’ve got enough problems in South Africa to take any more blame for what’s been going on.
   I see industrials have been holding up pretty well, and we’ve seen a lot of numbers coming out from the resources side. We’ll talk a little bit about that in a second. But on the industrial side – were they holding up well today?

DAVID SHAPIRO: Remember, the weaker rand has quite a strong impact on shares like British American Tobacco, Breweries, Richemont, Naspers and so on. So they had a very good day.
   On the other hand, concerns about the naira in Nigeria weighed on MTN and then yesterday we had the Tiger Brands update. Tiger Brands fell about I think 6/7% yesterday, I can’t remember. It fell another 4% today just on concerns about what this is all going to mean for the food producer.
   So those were some of the weaknesses. There were quite a few trading updates today as well. Wilson Bayly Holmes came out with a trading update, issues in Australia taking their profits down.
   The best one of the day was Santam, up 8% today. They came out with a trading update with a big turnaround in crop insurance. In other words, agricultural insurance, largely the result of no hail damage. In fact, probably no rain to cause any damage at all. Maybe the damage is going to come from drought next year. But a very strong result out of them.
   I know we are gong to talk about Kumba. It was also one of the big talking points.

SIKI MGABADELI: I’m going to touch on them very quickly. We talked quite a lot towards the end of last year, beginning of this year, about those iron-ore prices, and we are starting to see it, I suppose, in their numbers.

DAVID SHAPIRO: I think the big disappointment, the two concerns that analysts pointed out were, No 1, worries about the rising debt – and also about capex. So they have to strip away ground in order to get to the ore body, and that takes quite a bit of expense. I think that was a big worry. Also they increased their dividend cover. Kumba has always been liked for its very strong dividend policy but, of course, if profits fall, they have to reduce the amount of dividend. So the dividend has come down quite excessively. And I think if I had to point at where the share was now, round about R235-odd/share, I think analysts now are looking for a price of about R205. They still see further weakness in it. It was a big draw-down on the mining boards today.
   But we saw platinum shares also coming back, gold shares giving back a bit of ground. It wasn’t a good day on the mining boards. I think the big features were our foreign-listed industrials, and also some of the financials which held up pretty well.

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