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Several issues take the market down: David Shapiro – Sasfin

Nampak numbers disappoint, as it relies more and more on the rest of Africa.


SIKI MGABADELI: Talking markets now with David Shapiro, who is with Sasfin. Of course, our market is down. The all-share is down 1.89% at 52 963. The Top 40 is down 1.94%, and the rand R12.05/dollar, R18.53/pound and R13.13/euro.
    David, yesterday all markets around the world were closed and we were flat, and then it just tells you the difference between two days.

DAVID SHAPIRO: You know Siki, it was a convergence of a whole lot of issues that took the market down. Locally our GDP numbers were lower than the market was expecting, really a consequence of drought conditions. I don’t think that had too much effect on the market. It did weigh it down a little bit.
    What’s really taking the market down is worries about a rate increase in the United States. We can’t ignore the deadlock in the talks between the EU and Greece, but what’s really worrying the market is that Janet Yellen said that rates will rise this year if the economy improves, which she expects.
    So today we had improving capital goods orders, we had rising home sale prices and then increasing consumer confidence. So all of that strengthened the dollar, weakened the euro, taking gold down, taking platinum down, taking oil down – and of course that weighed on the market. So right across the board.

SIKI MGABADELI:  And of course our own growth number is not helping here at home as well.

DAVID SHAPIRO:  It’s worrying, because the unemployment rate is now up at 26.4%. We always quote 25%, and we said that things were improving. I think that’s a worry. And also what does lower growth mean? We pencilled in 2% – we could still get it. But if we don’t make that number, what does it mean for unemployment, what does it mean for consumption across the board?
    But I think it was more offshore – it was more the drop in offshore markets that kind of flowed through here, led by drop in miners. So Anglos down, Billiton down. The only share that picked up was Kumba, which is up 2%. The iron-ore price came down. Again, what happens – it’s like playing snakes and ladders. PPC last week clawed its way back from R16 to R20 – today 7% down. Again, 6.5%. I think the biggest shock, though, and I’m not sure whether you are talking to them, was Nampak.

SIKI MGABADELI:  No, we are not, but 13%!

DAVID SHAPIRO:  But it was a really disappointing number and caused by what happened in South Africa, trading conditions in South Africa, particularly in glass. And if you go through the numbers, if you look at their trading profits, you are actually going to find that their trading profits in the rest of Africa were just under South Africa’s. But they are relying more and more on the rest of Africa. In their results numbers they constantly picked on that, saying ja, things are improving there. Very poor conditions, again pointing to difficulties within the South African [overtalking].

SIKI MGABADELI:  I think that’s why we need to watch those growth numbers and other data very carefully. We’ve been speaking to a number of companies, as you know, over the past few weeks, many domestically focused, which, if the consumption in the economy in South Africa continues to slow down, is eventually going to have a much bigger impact on their earnings and then something might happen to their share prices.

DAVID SHAPIRO:  I think that’s why they thumped banks and certainly thumped a lot of the retailers. A number of retailers were down. But it’s a worry. Look, volumes were high, volumes were back at R19bn today, making up for yesterday’s R6bn.
    Then we’ve also got issues like MTN, which is facing issues in Nigeria.

SIKI MGABADELI:  And it’s a third of their revenue [overtalking].

DAVID SHAPIRO:  I thought it was more round about 50%. But, anyway, we’ll…

SIKI MGABADELI:  Do you know who we are talking to today? It’s Taste Holdings. They saw a 17% growth in headline earnings – and yesterday I think it was we spoke to Famous Brands. Between the two, which do you like?

DAVID SHAPIRO:  I’m a Famous Brands [man]. You know why? I’ve got nothing against Taste. I think if you look there are all kinds of adjustments. They did an enormous number of acquisitions and they are trying. But they are a mini, what’s it, Spur. I think Famous Brands is setting the pace and I think it’s a wonderful company, and it’s now a manufacturing company. I’ve rather have them than Tiger Brands.

SIKI MGABADELI:  David Shapiro is with Sasfin.



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