SIKI MGABADELI: Let’s check the markets. Gold miners up 2.3% today, pushing the all-share to 53 921, up about 0.33%. The Top 40 index is up 0.25%. The rand is at R15.57/dollar, R22.82/pound and R17.41/euro. Gold is at $1 221.95/oz, platinum still below $1 000 – it’s at $992.83/oz and Brent crude oil at $49.39/barrel, very close to $50.
David Shapiro, we were close to the record high that we had in April last year, weren’t we?
DAVID SHAPIRO: No. That’s 55 000. But we did go to 54 000, and then right towards the end we just lost altitude. I’m not sure why. Literally in the last few minutes we came tumbling down. It could have been traders taking profits on the day.
SIKI MGABADELI: Because yesterday was very strong.
DAVID SHAPIRO: But look, we are up a nice 0.4%, with strength right across the board in all sectors – financials, industrials, and in the mining sector. I think the big story was oil going above $50/barrel. On the other hand, iron ore has fallen below $50/ton. Iron ore in April was close to $70, but that was frenzied buying in Chinese derivative or speculative markets. So that’s coming back, and it looks like losing altitude, losing ground. So we saw Kumba and Assore down.
But otherwise good movements on the mining markets. There was a bit of a sell-off at the top end of the industrial market. Siki, globally markets were not under pressure but they just lost steam. We had two very good days in the United States, two very good days in European markets and in the UK markets, and that just couldn’t carry through today.
SIKI MGABADELI: You can see it – Naspers, BAT, SABMiller, all of them down.
DAVID SHAPIRO: It took a bit of the edge off the industrial market. Richemont, strangely enough, was quite strong after poor results.
SIKI MGABADELI: It’s taken a toll since Friday.
DAVID SHAPIRO: It was below R90 and its R93 today. MTN also came under a bit of pressure. There are still worries about what’s happening in Nigeria, and what’s happening in that region. It did reach R130, it got above R130 for a bit but seems to be now falling back below those levels and trading down. But overall a very good day.
What’s also interesting is that Bidvest was up strongly, and we see the end of Bidvest. I don’t know whether it’s tomorrow evening or Monday evening. I’m going to a party on Monday night. They invited me.
SIKI MGABADELI: Tell Brian Joffe I am gate-crashing [overtalking].
Anyway, let’s have a look at this market. AB InBev says they’ve got the exchange-control requirements, so they are quietly getting closer.
DAVID SHAPIRO: One step at a time.
SIKI MGABADELI: They are hoping to wrap this up by the second half of this year.
DAVID SHAPIRO: By the time you get the money – probably October/November, maybe even as late as December. But they are moving pretty fast in getting competition approval around the world but they’ve still got to wait for South Africa.
SIKI MGABADELI: This was the Reserve Bank.
DAVID SHAPIRO: Other issues – retailers were very strong. Massmart came out with a statement at the AGM. If you look through it, it was pretty modest. It looks good on the face of it but, if you do the numbers, it points towards lower volumes in a number of sectors. But markets seemed to like it and moved it up 5%.
I know you are talking about Foschini. The share is up 2.5%, again embracing Phase Eight, which was their acquisition overseas.
SIKI MGABADELI: And they had another one earlier this year.
DAVID SHAPIRO: Poor old Mpact. Mpact got knocked on their trading statement. It picked up yesterday after an analyst presentation and today it lost ground, reporting that it was getting a raid from the Competition Commission. But they deny it, coming out very strongly against price collusion and that. But still, the market said, hold on, this is just too much for us to handle.
SIKI MGABADELI: There have been too many stories about that kind of thing.
DAVID SHAPIRO: So I don’t know what the truth is. First of all we don’t know why earnings are going to be down 20%, and also what this Competition Commission raid means for them.
SIKI MGABADELI: Famous Brands – another acquisition.
DAVID SHAPIRO: You cannot have a good fast-food chain without proper chips, and now they’ve bought a chipmaker.
SIKI MGABADELI: This chipmaker was their supplier for 20 years, and they must really like their chips for them to buy it.
DAVID SHAPIRO: To me the best chips are still MacDonald’s.
SIKI MGABADELI: Really? Don’t you find them too thin
DAVID SHAPIRO: But they are crispy.
SIKI MGABADELI: Abil as well – finally we are starting to see that entire saga start to be neatly put together. Obviously the good bank is separate from them now but it looks like, from the business rescuer, the guys who are managing it are going to be handing that back to the shareholders and maybe getting a new board in place and executive directors. Let’s see what happens.
DAVID SHAPIRO: You know more than I do. I don’t know when this is really going to happen.
SIKI MGABADELI: It seems to be pretty soon.…
DAVID SHAPIRO: It’s not going to be listed for some time.
SIKI MGABADELI: It’s going to need some time. It was one of those situations that was a bit scary when you think about people who were exposed, not only as shareholders and bondholders, but also people who had loans in that business. So it’s going to be one to watch.
The rand – how are we doing?
DAVID SHAPIRO: R15.50, R15.60/dollar. I think everyone is holding their breath until we get the reports from Fitch and S&P. I actually don’t believe we are going to be downgraded. I think they are going to extend it as long as they can with warnings, as we heard from Fitch – as Tumisang brought up in the news – saying look, do anything like this and we will downgrade you. So I don’t think we are going to get a downgrade but I think there are going to be some very strong statements about how to conduct ourselves going forward.
SIKI MGABADELI: And some of the economists I’ve spoken to have said, look, six months is not enough time to give us to get our house in order. So maybe they’ll wait now, but they will be very stern.
DAVID SHAPIRO: That’s what I think will happen and it depends how you interpret it. There will probably be knee-jerk reaction, which will be positive, seeing the rand improve. But we’ll still be on watch and we can’t take this as an endorsement. It’s not an endorsement.
SIKI MGABADELI: Certainly not.