South African equities closed in the red on Friday, with broad-based selling that saw the All Share and Top 40 Index close lower by 2.08% and 2.29% respectively. This came ahead of the G20 meeting that took place in Buenos Aires, Argentina on 30 November and 1 December and where traders appeared to de-risk ahead of the potentially market-moving event. On the Top 40, only three shares, Pepkor, Anheuser-Busch Inbev and Hammerson managed to close in positive territory while laggards included Firstrand (-4.67%), Bidcorp and (-4.62%) and Mr Price (-4.24%). The Rand, which strengthened during midweek, gave up much of it’s gains on Friday, testing a low of R13.93 versus the US Dollar before settling at R13.86 at the close. This morning we trade at R13.75.
In terms of the major sectors, the Resources 10 shed 2.04%, the Industrial 25 shed 2.20% while the Financial 15 closed lower by 2.67%.
In Europe, stocks closed lower with the DAX losing 0.36%, the FTSE shedding 0.83% and the CAC40 closing 0.05% down for the session.
In the United States, markets closed higher ahead of the G20 meeting, with the Dow30 adding 0.79%, the S&P500 adding 0.81% while the Nasdaq Composite closed higher by 0.79%.
This morning in Asia, stocks trade higher as the US and China agree to a trade war ceasefire. In addition, US futures are also in positive territory while Brent Crude Oil is higher by nearly 5%.
This week important releases include US jobs report, trade balance, ISM PMIs, factory orders and the preliminary reading of Michigan consumer sentiment; interest rate decisions from the Bank of Canada, Reserve Bank of Australia and Reserve Bank of India; UK Markit PMIs; Eurozone final Q3 GDP growth and retail trade; Germany factory orders and industrial production; China trade balance, inflation and Caixin PMIs; and Australia Q3 GDP growth, foreign trade and retail sales. Investors will also react to next week’s OPEC meeting.
In addition to the international data, investors focused on South Africa will be watching Tuesday’s GDP release where growth is expected to rise by 0.5% (QoQ) and 0.6% (YoY).
To view additional economic data, please visit the following link: http://www.unum.co.za/economic-calendar/
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SYGNIA LIMITED – Audited summarised consolidated financial statements for the year ended 30 September 2018
– Assets under management and administration of R222.6 billion as at 30 September 2018 (2017: R184.3 billion), up 20.7%.
– Revenue of R421.9 million (2017: R333.1 million), up 26.6%.
– Profit after tax of R101.0 million (2017: R92.5 million), up 9.1%.
– Headline earnings per share of 69.15 cents (2017: 69.72 cents), down 0.8%, and diluted headline earnings per share of 68.42 cents (2017: 68.82 cents), down 0.6%.
– Total dividend per share of 60.00 cents (2017: 60.00 cents).
STATE OF AFFAIRS
The past year has proven to be extremely challenging for all emerging markets, including South Africa. This has made the trading environment complex to navigate, particularly for cyclical businesses like Sygnia.
Global and domestic factors On the domestic front the first quarter ended on a burst of optimism as Cyril Ramaphosa replaced Jacob Zuma as the president of the ANC. The markets cheered, as did the rand. This was followed shortly thereafter with the replacement of Zuma as the President of South Africa, signifying a dawn of a new political era. The rand touched R11.70 to the US dollar, and the FTSE/JSE All Share Index reached a high of 60 225.
Unfortunately, the “Ramaphoria” was short-lived as global macro-events caught up with our domestic markets. Strong economic growth in the US, combined with tax breaks which provided an unexpected boost to corporate earnings, led to the lowest unemployment figures in recorded history, and an associated uptick in inflation, spurring the US Federal Reserve to continue increasing interest rates. This, in turn, reversed the investment flows into emerging markets, with foreigners selling off bonds and equities in an almost indiscriminate manner. Macroeconomics aside, volatility increased as US President Donald Trump took a baseball bat to global trade relationships with the imposition of trade tariffs on aluminium and steel, promising more to come. His main target was China which has enjoyed a US$30 billion a month trade surplus with the US for many years. Although the move was initially interpreted as a negotiating tactic, it soon became apparent that this was a strategy. Upsetting global trade relations has meant that all major institutions, such as the IMF and the World Bank, cut their forecasts for global growth for 2018. Risk appetite evaporated at a rapid pace. Oil prices shot up on geopolitical risks, including the US’s withdrawal from the landmark 2015 nuclear deal agreed between Iran and world powers and re-imposition of sanctions, as well as the complete collapse of Venezuela’s economy. Turkey also paid a price for taking on the US as the lira plunged, forcing the central bank to rapidly increase interest rates. In the Middle East, Saudi Arabia, emboldened by the prosperity of higher oil prices and perceived support from the US, murdered a dissident journalist, Jamal Khashoggi, bringing into focus just how unstable relationships with countries that do not respect human rights can be.
Developed markets have also had their share of woes with Brexit looming on the horizon without a clear deal between the UK and the European Union, and Italy, Poland and Hungary flexing the strained cords of the terms of their membership of the EU.
In South Africa, political change did not bring about an economic turnaround. Battered by global events and slow progress in fighting corruption, by the third quarter we entered a recession, with unemployment at record highs and discontent growing. With the rand back at R14.20 to the US dollar, everyone feels poorer. Political rhetoric around land appropriation without compensation, the resignation of Minister of Finance, Nhlanhla Nene, and the pushback from public servants fearing prosecutions have meant less investment, more pessimism and an increasing realisation that there are no quick fixes.
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