Taking Stock - Ford to start building electric Mustangs.

In todays taking stock, we discuss Ford's plans to start building electric Mustangs in China.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks fell, posting their worst week in three months on dented risk appetite, with the Johannesburg Stock Exchange's Top-40 Index down 1.33% and the broader All-Share Index falling 1.16% (now at 62,472 index points). MTN Group was among the decliners, after telecoms regulator said on Friday it will challenge a court application by the mobile network operator seeking to review or scrap the regulator's auction process for awarding spectrum vital for rolling out 5G technology. Its shares closed 1.04% weaker, while its rival Vodacom, who also stands to be excluded from purchasing the crucial 3.5GHZ radio frequency spectrum band vital for 5G, fell 1.21%.

 

 

EUROPEAN MARKET COMMENTARY

European markets closed lower Friday as market jitters persisted over a retail trading frenzy that has rocked Wall Street. The pan-European Stoxx 600 ended the session down by 1.9%, with retail stocks shedding 2.6% to lead losses as all sectors slid into negative territory. Sentiment has been jolted by a surge in speculative trading from retail investors, and several e-brokers took steps to curb the deliberate buying of heavily-shorted names on Thursday after a week of huge and seemingly synthetic moves in unfavoured names like GameStop, spurred by Reddit group WallStreetBets. The European Commission also placed temporary controls on the export of coronavirus vaccines made inside the bloc, following a spat with AstraZeneca and wider supply issues.

 

 

US MARKET COMMENTARY

US stocks fell sharply on Friday, wrapping up a roller-coaster week on Wall Street as heightened speculative trading by retail investors continued to unnerve the market. Shares of GameStop jumped 67.9% after Robinhood said it would allow limited buying of the stock and other heavily shorted names after restricting access the day before. Robinhood raised more than $1 billion from its existing investors overnight, in addition to tapping bank credit lines, to ensure it had the capital required to allow some trading again in volatile stocks like GameStop. Investors are concerned that if GameStop continues to rise in such a volatile fashion, it may ripple through the financial markets.

 

 

ASIAN MARKET COMMENTARY

Asian shares rallied on Monday and U.S. stock futures recouped early losses as newly empowered retail investors turned their attention to precious metals, promising a respite to some hard-hit hedge funds. Talk now was that silver was the new target for the retail crowd, as the metal jumped 6% to a six-month high, possibly limiting the need for distressed selling by stock funds. Two surveys from China showed factory activity slowed in January as restrictions took a toll in some regions.

 

 

CURRENCY MARKET COMMENTARY

The rand stormed to a one week best on Friday, shaking off a bout of negative sentiment that hobbled other risk markets as the high yield on offer on local assets lured investors. At the close the rand was 0.33% firmer at R15.16 per dollar. The safe-haven dollar found support at the start of a new week with traders remaining wary amid the battle on Wall Street between hedge funds and retail investors. Wrangling over the size of President Joe Biden’s fiscal stimulus package and delays to vaccine rollouts also weighed on sentiment, stoking demand for safer assets.

 

 

COMMODITIES MARKET COMMENTARY

Silver soared as much as 7.4% to climb a nearly six-month peak this morning, after social media posts last week called for retail investors to flood into the market and push up prices of the precious metal. Silver has risen nearly 15% since Thursday, when posts began circulating on Reddit urging retail investors to buy silver mining stocks. Oil prices edged higher early today after a weak start, holding on to the past three months of gains, although patchy coronavirus vaccine rollouts, new infections and the discovery of new variants are keeping a lid on prices.

LOCAL COMPANIES

Spur (SUR) -0.6%

Spur Corporation said on Friday half-year total franchised restaurant sales dropped 29.5% due to Covid-19 trading restrictions and lower consumer disposable incomes. The restaurant sector has been one of the hardest hit industries in South Africa as lockdown restrictions, curfews, cuts in seating capacity and a ban on the sale of alcohol have hammered profits, pushing some out of business. Spur’s total sales fell to R2.9 billion ($192 million) for the six months ended December 31 from R4.1 billion in the same period a year earlier. Sales from franchised restaurants declined by 31% in South Africa and by 17.3% in international restaurants in rand terms, the owner of the RocoMamas burger chain and Spur Steak Ranches said. In December the South African government re-imposed some lockdown restrictions such as the ban on alcohol sales, longer night curfew hours and the closure of beaches. This impacted Spur’s December sales, which declined by 25.8% in South Africa compared with a year earlier.

 

Ster-Kinekor

Ster-Kinekor Theatres, South Africa’s largest cinema chain, has entered business rescue. In a statement, it said its board decided to enter “voluntary business rescue proceedings with effect from January 27, 2021”. Stefan Smyth, a partner at EY in the Africa Turnaround and Restructuring Strategy practice, has been appointed as the business rescue practitioner. The group’s cinemas will remain open as the company reorganises itself.The group, which runs 55 movie complexes with more than 400 screens and 64 000 seats, was a profitable business until the Covid-19 crisis started early last year. “Up until February 2020, Ster-Kinekor welcomed millions of moviegoers every year to their cinemas. The business was profitable and highly cash generative, with good prospects of future/ongoing profitability from the pipeline of blockbuster film content that had been scheduled.” The Covid-19 crisis has since crippled the business as it was not allowed to operate at all for the first five weeks of the hard lockdown starting in late March 2020. At the end of August, the lockdown restrictions, to an extent, lifted and it was allowed to operate

INTERNATIONAL COMPANIES

Toys 'R' Us

Toys "R" Us is closing its only two stores roughly a year after a highly anticipated relaunch of the storied brand. Tru Kids, which bought the retailer in a 2018 liquidation sale, confirmed that its two locations in New Jersey and Texas that opened in late 2019 have permanently closed because of the pandemic. "As a result of Covid-19, we made the strategic decision to pivot our store strategy to new locations and platforms that have better traffic," a Tru Kids spokesperson told CNN Business. They added that demand for the brand "remains strong" and the company will continue to invest in it. Toys "R" Us' website remains operational and more than 700 stores outside of the United States are still open. The two stores had a smaller footprint compared to its predecessor that dotted US suburbs. They sold fewer toys and instead focused on interactive and playground-like environments for brands. Ultimately, the plan was to open around 10 of them in malls. Like other retailers, Toys "R" Us was hurt by the mall closures last year and shifting consumer habits that prompted people to shop online or at big-box stores.

 

Ford (F) -1.8%

The US carmaker said its Mustang Mach-E will start being produced there later this year as it looks to tap into China's electric vehicle (EV) market. Earlier this month, Tesla started delivering its Model Y to Chinese customers from its Shanghai factory. Western brands are aggressively targeting China, where EV sales are expected to grow strongly. Volkswagen said it would soon begin delivering vehicles produced at two newly-built Chinese factories dedicated to electric cars. China is the world's biggest car market with more than 20m vehicles sold each year. On Thursday, Germany's Daimler posted strong company results for 2020, off the back of a strong recovery in the global car market led by China. Daimler boss Ola Källenius hailed the company's rebound in China as almost "too good to be true".

 

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