SIKI MGABADELI: We saw the JSE edging downwards at the end of the day, ending down 0.1% on the all-share at 51 301, the Top 40 down 0.2%. The rand is at R12.61/dollar, R19.63/pound and R14.01/euro. Gold is at $1 097.69/oz, platinum at $983.70/oz and Brent crude oil at $53.52/barrel.
Maudi Lentsoane is MD of Lehumo Capital and joins me now. Maudi, thanks for your time today. We saw the gold miners, platinum miners, resources counters on Friday really taking a lot of pain. Did we see any recovery at all today?
MAUDI LENTSOANE: We saw a big recovery, surprisingly, in a market that gets a dead-cat bounce. But we certainly did see a very nice recovery. On Friday there was a massive sell-off there, justifiably so, if you look at all the numbers that have come out. A few weeks ago we were talking about Greece – Greece was on our radar screen – but now we are talking about China. And we saw with the PMI that came out from China, very disappointing, missing expectation – that’s very worrying. And we saw this morning with Chinese stock market also collapsing about 8.5%. So those are the worrying factors and for South Africa, the exporter of commodities, it’s a big thing, that slowdown in China
And of course the dollar strength as well. All these developments are obviously putting a lot of pressure on the commodity sector. So a big, big sell-off there.
SIKI MGABADELI: Absolutely. And we’ve got the Fed meeting this week as well, along with their GDP numbers due out on Thursday, so it’s going to be a week of watching what comes out of the US.
MAUDI LENTSOANE: All eyes on the Fed, of course. We obviously know, I think, the expectation is that we are not going to see much change to the rates in the US this week. But I think the big focus will be on the statement. All eyes will be on the statement to try and get some indication of when the Fed intends hiking interest rates. We know that there is the much-talked about September possible rate hike. It’s still a high possibility, and that’s why we’ve seen the dollar strengthen quite aggressively. But I think if that does happen, of course, we could see more sell-off on the commodities.
So, whatever the pick-up that we saw, we saw a very nice performance on the gold sector, I think it’s not over yet. We could still see more downside on these resources.
SIKI MGABADELI: Just looking at some company news out today, Group Five was down quite sharply today, ending down close to 13%. They said that their full-year profit fell as much as 50%. They’ve been in lots of trouble.
MAUDI LENTSOANE: The whole sector is in trouble, Siki. I think it’s very closely related to the mining sector. We’ve seen all the pressures in the mining space, and all those construction companies obviously are doing a lot of business in the mining sector, so you are not going to see good performance in that sector.
You saw Hulamin as well, all those disappointing numbers. I think it tells a story of the very difficult times that those construction companies are going under. Aveng is one of them as well. Murray & Roberts – all under pressure.
SIKI MGABADELI: And finally we saw news out of Pick n Pay, saying they plan to employ 5 000 people a year, opening new stores in South Africa. We saw from Shoprite as well that they are planning more store openings, and I just wonder – bucking the trend of the difficulties in the economy, and so on?
MAUDI LENTSOANE: Most certainly. I think a couple of years ago you had the biggest employer being the mining sector, and it looks like now they are shedding jobs and the retail space is where perhaps the jobs are being created – and rightfully so. If you look at the share-price performances as well of the retail sector, that’s where most of the performance has been. The mining sector is going the other way. So there is a divergence in terms of the performance of the two sectors. And I think it speaks volumes about the fact that there is a sectoral shift. And of course it’s the retail space that’s currently sort of holding onto the gains at the moment.
SIKI MGABADELI: And certainly we’ve seen that sectoral shift in also just the weighting of industrials versus the resources on the JSE.