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Some big gains in European stocks: David Shapiro – Sasfin

‘Kumba, Sasol, Anglos, Billiton, Glencore all traded in the red. Impala also down.’

SIKI MGABADELI: Markets now with David Shapiro of Sasfin. David, thanks for your time today. Well, it looks like mixed data out of the United States is putting some pressure on the dollar.

DAVID SHAPIRO: I think that’s the big story, Siki – that the dollar is weak and continues to weaken. I’m looking at it against the euro now. It’s up to $1.14/euro. I don’t think that’s where Draghi wants it to be – he would rather it was closer to 1 or parity, because that will help exporters.
    Nevertheless, even with the euro quite strong we had a very good day in European stocks. Switzerland was closed for Ascension Day but apart from that we saw some big gains in European stocks. That didn’t translate here. It could have translated better but the problem was the rand picked up. And with the rand picking up, it just took the edge off some of the translation gains. So we didn’t see too much up, certainly on the industrial side. British American Tobacco, Breweries, MTN made small gains, but I think other than that quite a negative day there.
    Of course, there are always little pockets of buying but, as a broad range, the market was down. I’m just looking at Naspers. I love Naspers. I was reading a report on Tencent and analysts there after the results came out were really swinging and upgraded their outlook. Now, Tencent is trading in Hong Kong dollars at about HK$160, and that was their target price. But they’ve increased it – and this is a UBS report I was reading – up to HK$188, which is a gain in Hong Kong dollars of about 15%. So don’t think that game is over. If they don’t meet those projections, then we can see Naspers here up at even higher than that. But today it never quite got there. We were down a couple of percentage points.

SIKI MGABADELI:  So how did our commodity prices fare? Gold I see hit a three-month high, but then of course that’s in reaction to that dollar rise.

DAVID SHAPIRO:  And the platinum price also picked up. Funnily enough, the only gold share that did move was AngloGold – it was up about 2.5%. But, apart from that, everything else was flat to negative.
    The rest of the commodity markets – we didn’t see much in other commodity prices. So Kumba, Sasol, Anglos, Billiton, Glencore all traded in the red. Impala also down. They came out with a production report. It’s always difficult to read. You have to be a mining analyst to interpret them. But the conclusion that I did manage to squeeze out of analysts was that production was below consensus – and they are also worried about the price of platinum. In other words, how this will affect trading or profit margins in Impala? So Impala came down about 3%. Not a good day on the mining board.

SIKI MGABADELI:  Well, Sappi came out with its second-quarter numbers and of course that’s after Mondi’s yesterday.as well. Looking at Europe, it looks like it’s also just a good-news story.

DAVID SHAPIRO:  Look, they are doing much better than they were – if we measure them over the last few years. The market didn’t react to the result. It was negative. But if you read through it you get a better feeling about where the company is going. I think one of the big aims is of course to bring down their debt, which they seem to have done. It’s not an easy company. I think you’ve got to buy this company when it’s absolutely bombed out and when things really look awful there. And then probably sell it in these kind of areas where it’s more difficult. I prefer Mondi, simply because Mondi is more in packaging. Their coated paper is still a big percentage, which is the top end of the paper market. It’s still a big percentage of Sappi’s profit. That’s a difficult market to trade in.

SIKI MGABADELI:  Old Mutual beat expectations and I suppose that’s laying nice groundwork for Bruce Hemphill when he takes over in the fourth quarter.

DAVID SHAPIRO:  He’s taking over a much stronger company than it was a few years ago. I’m sure we are going to see deals there and I’m sure we are going to see a lot more happening. I like Bruce. I’m not sure how he is going to feature in London. I don’t mean that in a negative way – I hope he does survive. It’s not always an easy place to survive, especially in financial services. But they were up about 0.5% today. They are OK – I think one of the few features on the financial board. The rest of that market was fairly negative, without casualties, just being marked down.

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