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‘There was nowhere to hide today’: David Shapiro – deputy chairman, Sasfin

‘I’m not that pessimistic. I think the sell-off has been overstated.’

SIKI MGABADELI: Looking at the markets today – red across the board, led by the resources index down 4.6%. The all-share down 2.9% at 48 515. The Top 40 down 3%. The rand is at R13.39/dollar, R20.52/pound and R15.09/euro. Gold is at $1 139.22/oz, platinum at $1 011.41/oz, and Brent crude oil is trading at $50.72/barrel.
    Just to give you a sense of the other indices, gold miners down 2.25%, financials down 3%, and industrials down 2.5%.
     David Shapiro is with Sasfin.

DAVID SHAPIRO: Ugly day, Siki, really. It was triggered by a PMI – in other words that’s a manufacturing survey that’s down that gives an idea of manufacturing into the future – the outlook for manufacturing. And in China it was the worst in about three years. So that just triggered fears that the Chinese economy is a lot weaker than people are expecting, although there is a shift to services there. But nevertheless, the market is slow to react to that and we saw a big sell-off in miners.
    Tumisang was talking about the oil price recovering yesterday. There was a massive turnaround but oil has fallen 5% today. So oil is back on a downward trend again.
    But it knocked our miners. The biggest hit today was Glencore, down 10%. It’s now trading at the lowest level since it was listed. The other big heavyweights like Anglos and Billiton were also down 5%.
    Gold shares also off. DRD is one of the few shares that showed anything on those results – up 14%. But it’s still a very small miner with a market cap of about R700m. Sibanye also just bucked the trend, gaining there. But other than that all miners were in the red.
    And a big, big sell-off in industrials as well. The big surprise – I know you mentioned Cashbuild results, but Mr Price came out with a trading update that was very disappointing. Sales were up 9% but somehow that disappointed. What they did admit is that they’ve made poor fashion calls, and also that winter came late and low levels of consumer confidence have hurt sales as well. So in comparison to where they were last year, this was a disappointing result. In absolute terms it’s fine, but the market didn’t like this at all – it knocked the share over 13%.

SIKI MGABADELI: That retail market is getting very competitive at the moment.

DAVID SHAPIRO: It’s getting competitive. Our retailers have done pretty well but you wonder, against a shrinking economy, how long they can last out. All the big retailers are making gains at the expense of mom-and-pop stores up to a point – and maybe like Mr Price some may have scored some own-goals. If we start to see companies like Woolies and Mr Price and Truworths slowing down I think there will be a reaction. Foschini did come out with a statement, incidentally, a statement they made at their annual general meeting – it was slightly more upbeat than Mr Price’s, but the market still knocked he share down about 6%. So you are not going to win in this one.

SIKI MGABADELI: Let’s sell by association, I suppose. Banks took quite a big hit. Standard Bank down 2.6%, Nedbank down 3.5%, and FirstRand 4.3%.

DAVID SHAPIRO: There was nowhere to hide today. Capitec also led this long list of decliners. When you get a sell-off today, it just takes the whole market with it.
    Funnily enough, I know this may sound offbeat, but I’m not that pessimistic. I think the sell-off has been overstated. I don’t share the same conclusion as everybody does about China. It’s still a big economy, it’s still dong okay. It might not be at 7% but, even at 5% it’s okay. America’s still doing pretty well. Yes, their manufacturing number was slightly down but this is a market sell-off and you are not going to stop it. You just let it run its course. Maybe share prices were slightly overpriced but not to an extent that should really cause further major disruptions. It’s hard to convince clients that.

SIKI MGABADELI: Good luck.

DAVID SHAPIRO: That’s the hardest thing – I can convince myself but no one else.

SIKI MGABADELI: I suppose the point right now is that everyone is in a bit of a panic mode. So what should people do because we know what happens in a panic?

DAVID SHAPIRO: I can’t say don’t worry. But if you are holding quality shares, just stay with them. Most of these companies are still making profits. Even if you look at Mr Price, they are still going to make profits. They are not making losses, they are not under pressure. Their balance sheet is not under pressure. They are well run, they’ve got good business plans. So I think eventually that will come through.
    The global economy is still growing, it’s not shrinking. We are not in recession. South Africa – we are going into a bit of a recession, mainly because of commodity prices. But generally our banks are going to show plus-10% growth. People are panicking and just throwing everything out. My view is you’ve just got to sit back and let it take its course.

SIKI MGABADELI: Do you think that commodity prices are all going to hinge on what we continue to see coming out of China?

DAVID SHAPIRO: We are vulnerable. I’m talking mainly in a global sense. I think eventually we will be pulled up by the global economy. But I must admit that that’s why we need these plans between the Chamber of Commerce and labour and government. We need to stabilise our economy. We are probably more vulnerable than most other countries but, from a global point of view, I’m not as negative as perhaps markets show. Here we’ve got to rein in and introduce a Greek austerity-style programme to stop us bleeding.

SIKI MGABADELI: The President already said we are tightening belts.

DAVID SHAPIRO: But he must start there – they must start with government and then we’ll follow suit.

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SA inc incredibly expensive while fundamentals are terrible! what is he talking about!!

new vehicle sales down 8% ! SA is in recession and multiples nose bleed

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