Samsung shifts focus to high-end chips to boost profits

LOCAL MARKET COMMENTARY

The Top 40 index and All Share index in South Africa closed lower on Wednesday, ending down approximately 0.6% at 78,647 and 86,759 points, respectively. This decline followed the government's projection of wider budget deficits and rising debt over the next three years, even as growth prospects improved due to enhanced electricity supply. This mid-term budget, presented under the first coalition government following the African National Congress’s loss of majority, highlighted commitments to drive economic growth and advance reforms, boosting investor confidence and supporting a rally in the rand and local currency debt.

EUROPEAN MARKET COMMENTARY

European markets closed lower on Wednesday as investors reviewed new corporate earnings, regional growth data, and the U.K. budget announcement. Preliminary data showed the euro zone economy grew by 0.4% in the third quarter of 2024, surpassing economists’ 0.2% forecast. In the U.K., Finance Minister Rachel Reeves outlined a budget that would increase taxes by £40 billion ($51.86 billion) to address what the Labour government has termed a “black hole” in public finances.

US MARKET COMMENTARY

U.S. stock indices closed lower on Wednesday as chip stocks fell and investors awaited upcoming corporate earnings. The Commerce Department reported that U.S. GDP grew at an annualized rate of 2.8% in the third quarter, just shy of the 3.0% forecast. Additionally, private payrolls growth exceeded expectations with a gain of 233,000 jobs in October. Meanwhile, investors kept a close watch on the tight presidential race between Kamala Harris and Donald Trump as the November 5 election approaches.

ASIA MARKET COMMENTARY

Asia-Pacific markets declined this morning as investors focused on the Bank of Japan’s (BOJ) rate decision and key economic data from China. The BOJ maintained its benchmark policy rate at 0.25%, issuing a brief statement without indicating when the next rate hike might occur. In China, manufacturing activity showed improvement, with the purchasing managers index (PMI) rising to 50.1 in October—its first return to expansion since April—beating economists' forecast of 49.9 and marking an improvement over September’s 49.8.

COMMODITY MARKET COMMENTARY

Gold prices hit a record high on Wednesday as uncertainty around the U.S. presidential election drove investors to safe-haven assets, while traders awaited economic data for insights into the Federal Reserve's policy direction. This morning, oil prices continued to rise amid optimism over U.S. fuel demand, fuelled by an unexpected drop in crude and gasoline inventories, and reports suggesting OPEC+ may delay an upcoming output increase.

CURRENCY MARKET COMMENTARY

The South African rand weakened on Wednesday after investors were disappointed by the finance minister’s highly anticipated budget speech. The dollar weakened against major currencies on Wednesday amid volatile trading, following stronger-than-expected U.S. economic data and the release of the U.K. budget. Markets are now focused on upcoming U.S. jobs data and the approaching presidential election.

Tiger Brands Limited (TBS) -0.22%

Shareholders are advised that for the year ending September 30, 2024, earnings per share (EPS) are expected to increase by 11% to 13%, rising between 190 and 224 cents above the 1 724.7 cents reported in 2023. Headline earnings per share (HEPS) are expected to increase by 3% to 5%, with a rise of 52 to 87 cents above the previous 1 734.7 cents. The difference between EPS and HEPS is mainly due to profit from the sale of non-core brands.

Astral Foods Limited (ARL) +1.13%

Astral shareholders are informed that for the year ending September 30, 2024, the Group expects a significant improvement, with earnings per share (EPS) projected to increase by 240% to 250% from the previous year, reaching between 1 866 and 2 000 cents per share (compared to a loss of -1 333 cents per share in 2023). Similarly, headline earnings per share (HEPS) are also anticipated to rise by 240% to 250%, landing between 1 853 and 1 985 cents per share (compared to a loss of -1 324 cents per share in 2023).

Lewis Group Limited (LEW) +7.30%

Shareholders are advised that the group expects a significant earnings increase for the six months ending September 30, 2024. Earnings per share (EPS) are anticipated to rise by 45% to 55%, reaching between 515 and 551 cents per share, compared to 355 cents per share for the same period in 2023. Similarly, headline earnings per share (HEPS) are expected to increase by 45% to 55%, reaching between 540 and 577 cents per share, up from 372 cents in the prior period.

Samsung Electronics Company Limited (005930) -0.84%

Samsung Electronics announced plans to focus on high-end chip production to boost profitability after reporting a 40% decline in chip profits quarter-on-quarter, contrasting sharply with rivals TSMC and SK Hynix, which saw record gains from the AI boom. The company, the largest global maker of memory chips, smartphones, and TVs, also warned of limited earnings growth this quarter due to intense competition in consumer electronics during the year-end peak. For the July–September period, Samsung posted an operating profit of 9.2 trillion won ($6.66 billion), up from 2.4 trillion won a year earlier but down from 10.4 trillion won in the previous quarter. The chip division returned to profitability with an operating profit of 3.9 trillion won, following a loss of 3.8 trillion won a year earlier, though down from 6.45 trillion won in Q2.

eBay Inc. (EBAY) -0.22%

Ecommerce firm eBay issued a fourth-quarter revenue forecast below Wall Street expectations on Wednesday, citing cautious consumer spending on collector's items and refurbished goods, which led to a more than 7% drop in its shares in after-hours trading. eBay expects fourth-quarter revenue between $2.53 billion and $2.59 billion, below analysts' $2.65 billion forecast, and projects fiscal year 2024 revenue of $10.23 billion to $10.29 billion, slightly under the $10.32 billion estimate. However, for the third quarter ending Sept. 30, eBay’s revenue exceeded expectations at $2.58 billion, with a 2% rise in gross merchandise volume to $18.3 billion.

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