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‘We played catch-up with the rest of the world’: David Shapiro – Sasfin

David is somewhat concerned about Telkom and Capitec.

SIKI MGABADELI: The market ended up, with the all-share up 0.58% at 51 595, the Top 40 up 0.66%. The rand is at R12.40/dollar, R19.45/pound and R13.94/euro. Gold is at $1 176.13/oz, platinum at $1 073.40/oz and Brent crude oil is trading at $64.70/barrel.
    It’s green, David.

DAVID SHAPIRO: We played catch-up with the rest of the world. But when you say “green”, there were two shares. No 1 share on our market is British American Tobacco, which is over R1trn. No 2 is SAB, which is also over R1trn. In fact, I think British American Tobacco is like R1.2/1.3trn. British American Tobacco was up almost 4% today, and the reason is there were a number of foreign brokers that upgraded the share. Of course, it’s listed in the UK. I’m not sure about Breweries – I didn’t see reports there but Breweries also had about a 3% rise. So when your top one and two are up by that extent it has an enormous effect on the rest of the market.
    No 3 share, which is Naspers, was down 0.5%. But, there is a big but, it came out with a trading statement, after the market closed, that their core headline earnings – that’s a measure they see of sustainable earnings – was up round about 25 to 30%. So a good report coming out of Naspers. But I don’t think Naspers has the ability to sway its share price. I think it is swayed by what happens to Tencent.

SIKI MGABADELI: Of course there was news out that Alibaba is looking to get into the whole internet video space, so it’s going to be interesting to see because Tencent has got that market cornered.

DAVID SHAPIRO: Alibaba was up in New York – I was watching it tonight. That’s up quite a lot. Tencent I think was down with the Chinese market. That was the big mover. I think MTN also had a fairly good day, and Richemont, both of which can have some kind of influence on the market.

SIKI MGABADELI: And the resources – how did they do?

DAVID SHAPIRO: Down. Assore down quite significantly. Gold shares down at the top end. Sasol up on a higher oil price – the oil price kicked up on lower inventories in the United States. The top end – mixed. Billiton up. Anglos, Glencore down.
    And retailers – the rest of the market pretty mixed. Hard to find a trend.

SIKI MGABADELI: I’m actually looking now at top volume, top value, and it’s a bit of a mixed picture when you have a look. So, as you say, the really big movers were those two top shares on the JSE.
    Everyone is waiting for the Fed, but they are going to say the same thing, right?

DAVID SHAPIRO: They are. No one expects anything. But they’ll be looking for clues as to when the first interest-rate rise will take place. Among commentators 80% believe it’s going to be September. [Laughs] What do I know? Christine Lagarde came out – she’s the head of the IMF – it’s the second time within a couple of weeks that she’s come out hoping that they delay it until…

SIKI MGABADELI: She is beginning to sound a bit desperate.

DAVID SHAPIRO: You know why? I think they are very worried about what the impact of a rate rise will be on the global economy. Things are starting to get into sync and she’s worried that it will mean a stronger dollar. A stronger dollar draws liquidity out – in other words, attracts funds from other economies which might struggle to replace them. From an emerging market point of view an interest-rate rise is not good. It’s not going to do us any favours – Brazil, Turkey and so on – where we need foreign flows. Maybe she’s just worried what the impact will be on other economies.

SIKI MGABADELI: And we had the Eurozone CPI out today – that was unchanged. But in the UK the consumer inflation rebounded into positive territory, so 0.1%…

DAVID SHAPIRO: They want that down about 2%

SIKI MGABADELI: They absolutely need that.

DAVID SHAPIRO: Two other shares that I picked up today are worrying me a little bit. The one is Telkom – down 3% today, even after its results. Looking at Telkom, they hit about R85 in March; that was their high. And they are all the way back, down to about R57, which is a 40% fall. So it has suffered a massive decline. Look, it rose – I think last year it was up about 100% – it went from virtually zero to R85, and it has now come back.
    The other one that’s also now causing concern, because it’s not a bad company, was Capitec. Capitec shot up dramatically as well, reaching – I can’t remember its exact price – but it has also reversed about 20% from the high that it reaching in about April.

SIKI MGABADELI: What do you think is weighing it down?

DAVID SHAPIRO: I just think they ran up too far too fast, both of those. There was a lot of money. And technicians say that a 20% decline is a bear market in those shares. So if it has fallen 10%, that a correction. If it’s 20% you are going into bear market. But I just warn you that Capitec is reversing a lot of the gains that it made, but without really impacting on the actual trading of the bank.

SIKI MGABADELI: Right. I see you are wearing your scarf …

DAVID SHAPIRO: It was cold outside.

SIKI MGABADELI: ,,,and we’ll be talking load-shedding in a moment.

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