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Sasfin hit by heavy one-off loss on banking side

FirstRand results disappoint compared to those of Nedbank and Discovery – David Shapiro on Tuesday’s market.

NASTASSIA ARENDSE:  Good evening and welcome to the SAfm Market Update with Moneyweb with me, Nastassia Arendse.

Joining me on the line is David Shapiro from Sasfin Wealth to take us through the day’s market performance. David, how did the markets do?

DAVID SHAPIRO:  Well, brilliantly. They are up 2.3%. I haven’t seen this kind of move in a long time, but I do have a short memory, so it might have happened not too long ago. So it’s a big, big gain.

Tash, there were three things that drove the market today. First of all, our growth numbers for the fourth quarter surprised on the upside – a big turnaround in agriculture.

Then, starting in Asia this morning, the news or what appeared to be a diplomatic breakthrough between North and South Korea that could lead to the de-nuclearisation of North Korea, which also had a very positive effect on markets, particularly in Asia.

And then the market is beginning to discount that President Trump’s proposed tariff increases in steel and aluminium might not happen. So a lot of discussion that these proposals are facing very, very stiff opposition within his own party, within the country and also outside the country. So it’s still a very fluid situation. No one knows what’s going to happen. But I think put those three together and we had very strong markets.

It started in Asia this morning and spread though to our mining in a big way. Kumba is up 6%; they would benefit from the scrapping of those tariff increases. It is still pregnant with dividend, Kumba, still got a R15 dividend that you’ll get – today was the last day, so I think it’s over now. But Assore up, Anglo very strong, also helped by some good diamond sales. Billiton very strong. Harmony is leading gold and plats up about 4.25%. Miners were the best-performing sector.

And then Tencent was up about 3% – that lifted Naspers 4.25%. So with Naspers’s heavy influence on the index, that underpinned some big gains there.

The other big story is that we are getting the inclusion and exclusion of a number of stocks in the Top 40. Truworths, Imperial, Foschini are going to be included. They were all up very strongly – Truworths and Imperial up 6%, Foschini up 5%. For the love of me I can’t remember the fourth stock that’s going to be included. Of the property stocks, Fortress, Resilient, I think Intu falling out.

Also Tiger Brands recovered after yesterday’s Listeriosis scare; that share was up 2.5%.

A couple of laggards – Aspen down 2%, Bidcorp declining 1.25% as well.

So a lot of gains on the industrial market. Financials – FirstRand’s results a little disappointing. Weak growth there, loan growth I think keeping the results down there, and also the bank complaining or mentioning that both consumer and investment growth down because of the health of the economy. So they were up 1%. That’s a good gain, but I think relative to what we saw in the rest of the market. Nedbank up about 4% and Discovery up about 3.5% were some of the better leaders.

I can’t go without mentioning Sasfin. We produced a trading statement that shocked me. Interim headline earnings could be down as much as 45%, mainly because one very heavy loss on the banking side. It’s a one-off, but still has a big impact. So those shares were down about 8 or 9%. So no fresh bread for me tonight.

NASTASSIA ARENDSE:  Ah, I’m sorry. [Laughing] You didn’t mention GDP numbers out today. We were surprised by the figure.

DAVID SHAPIRO:  I think the market was surprised, mainly because of the turnaround in agriculture. We were looking for, I think, 2% or a little over that. But it was significantly higher than that. It lifts our growth in 2017 to 1.5%, which is well above where the market was expecting. So good numbers.

I suppose we have to look at whether agriculture can continue this, and whether mining, or if we are going to get similar gains this year. I know we were coming from a very low base. So the market I think is probably pricing in a 1.5% gain this year. That’s what finance minister Nene said – 1.5%. But the market liked it of course, to see this gain. Also I think the rand benefited from that. It’s round about R11.75/dollar. Remember yesterday we opened up at about R12, so there has been a big turnaround in the rand as well as on the forecast.

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