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. David, how did the markets do?
DAVID SHAPIRO: We ended down slightly. It was a very topsy-turvy day, up and down, all over the place. It’s very difficult to draw a line or draw some kind of conclusion as to what dominated our market.
US markets are only six hours behind in the US, so they open at 15:30 our time. They opened quite strongly on the back of the inflation numbers, which just showed that the very strong inflationary pressures that we saw in January were fading. So the market picked up there. It’s stable at the moment.
Europe and UK markets were a bit down. That reflected on our market. And also, if you look at our mining markets, also under a bit of pressure.
But I think some of the dominant forces today – we still see big pressure on Tiger Brands. The share was down another 2.5%. And of course, since those allegations of Listeriosis stemming from their factories, the share is down about 20%, which is a lot more than they are likely to suffer in their actual financial accounts. But the reputational damage is really knocking the share.
The other one that is also a mystery is Aspen, and it’s more on worries on the publication of negative reports. I don’t know what the fear is, or why the market has fear. That took the share down another 3%, rather than any response to their recent numbers. So Aspen has been under pressure.
We saw pressure on retailers as well, Woolies, Dis-Chem, Truworths, Foschini all coming down, with Woolies down about 2.5%. I also think they ran up a little too fast during that January period, and they are correcting now.
And then Steinhoff disposed of 17% of a 43% holding that they had in KAP. It was in a bookbuild. It was heavily over-subscribed by investors. The shares were placed at about R8.15, and they traded at R8.54 today, which is only 0.5% up on last night. But the overhang has been taken, and I think the market responded positively there. So KAP is doing okay. But Steinhoff is down 3.5%. They did raise R.3.7 billion, but I think the fact that they are having to sell out of KAP and realise cash is worrying the markets as well.
And the mining market, Tash – I know there are a lot of numbers coming out of China tomorrow, and I think the reading is that they could be a bit weak. That’s coming through in the commodity market. I know commodity markets are also hurt by the Trump tariff increase, worries about that.
Sasol, though was the biggest faller today, down about 3%, although there is no real reason why Sasol would have come down. I’ve been following then lately and I think they ran up quite heavily recently, and it’s just a correction of a run that maybe shouldn’t have taken place.
Also financials – Capitec continues to grow. I know that bears have been short of the stock and are still talking it down. But I think that’s picking up a bit of pace.
And FirstRand, which had also been knocked down heavily last week, was just picking up 2.5%.
What else was there?
NASTASSIA ARENDSE: You missed [US] consumer prices just ahead of the Fed meeting next week. What did you think or them? Were they tepid, not too warm, not too cold?
DAVID SHAPIRO: Exactly like that. I think that the market was expecting more, was expecting a higher number, and the fact that it wasn’t that high or that robust I just satisfied the market. Look, they have a core [number], they have a headline – it’s very difficult to know which number they follow. The core number is 1.8%, so that’s below the 2% target, and I think that’s what the market is responding to. The actual headline number is about 2.2%, which is over. But still, I don’t think it’s a pace that one needs to worry about.
From our point of view, we had manufacturing numbers out today, which were quite important because that does show that the economy is stabilising and doing a bit better. The debate now is whether, against these kind of numbers that we are seeing – which are improving numbers – the Reserve Bank here will actually lower rates. I think the consensus is moving towards their actually keeping rates unchanged at this stage. No real reason to bring down rates.
NASTASSIA ARENDSE: There is so much happening in the US and China – you were talking about China earlier. I remember last week or on Sunday China’s parliament overwhelmingly endorsed that controversial change to the country’s constitution.
And then over in the US you’ve got Rex Tillerson, secretary of state, being given his marching orders; but he hasn’t been told in person that he no longer has the job. What do you make of what’s going on politically globally?
DAVID SHAPIRO: Well, the Chinese debate is a massive debate. It’s about authoritarianism or whether he’s the right kind of person to keep China’s reform on track. I don’t know enough about it to really enter the debate, but I think it’s something that’s sends shudders down everybody’s back. They don’t like the president or leaders to have an unlimited role or stay there for an unlimited time.
But in America – I think this is all around Iraq. Trump doesn’t like the Iraq deal that was signed by President Obama. He’s never liked it. Now, Tillerson was in favour of it, he didn’t want to alter it. He was quite critical about Trump wanting to abandon it. Now Mike Pompeo, who is the head of the CIA, is also against this deal – Iran. He is on Trump’s side. So it might be around that that Tillerson has been ousted. Suddenly we’ve become experts on the US. I don’t know, I like to watch it.
NASTASSIA ARENDSE: It is very interesting because locally I hear a lot of CEOs talk about political uncertainty, blah blah, which is very interesting, but somehow I get attracted to what’s happening on the other side of the ocean.
A quick question before I let you go. Do you pay attention to African Rainbow Capital?
DAVID SHAPIRO: I looked at it today. What’s interesting about it is that I looked at the numbers and this is a share that’s trading at about R6.20 – it was up 5% today. But, according to African Rainbow Capital, what they call their intrinsic net asset value they put at around R8.79. So here’s a company which on the market is trading at a huge discount to the perceived value of the company. I went through the investments, so it’s very, very difficult to understand. There are lot of them, which were picked up originally from African Rainbow Minerals itself and put into this vehicle, and they increased some of them as well. They are all empowerment-run, as they say, their investment is in black-controlled entities. But you’ve got to learn a bit more about them. Some of them we know, some of them are listed, but a lot of them are unlisted. But if you believe the directors’ valuation, then they are trading at a big discount.
NASTASSIA ARENDSE: Thanks, David.