Taking Stock - Aspen to avoid a potentially hefty EU antitrust fine.

In todays taking stock, we look at how Aspen is likely to avoid a potentially hefty EU antitrust fine as it offers to cut its cancer drug prices.

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MARKET COMMENTARY

SOUTH AFRICA

Local stocks finished firmer yesterday, led higher by resources. The Top 40 index added 0.32%, while the broader All-Share gained 0.36%. The local resources index added 0.65%, followed by the financials and industrials which gained 0.21% and 0.14% respectively. In other news, Aspen is set to avoid a potentially hefty EU antitrust fine, with regulators poised to accept its offer to cut cancer drug prices in the coming weeks, two people familiar with the matter said. The European Commission has in the last decade cracked down on the pharmaceutical industry for pay-for-delay deals between brand name companies and their generic rivals while shying away from excessive pricing cases.

 

 

EUROPE

European stocks closed higher on Wednesday as positive market sentiment continues amid a busy week of earnings reports. The pan-European Stoxx 600 closed up over 0.3%, with autos adding 2.7% to lead gains as most sectors ended the session in positive territory. Italian shares led the way, with the FTSE MIB jumping 2.1% on news that former ECB President Mario Draghi is set to form a unity government. The euro zone’s economic downturn deepened in January as coronavirus-induced lockdown measures hit the services industry, new data revealed Wednesday. IHS Markit’s final composite PMI (purchasing managers’ index) reading for January, a useful gauge for economic health, came in at 47.8 last month compared to 49.1 in December.

 

 

US

The S&P 500 climbed slightly on Wednesday, rising for a third straight day as investors digested a wave of corporate earnings. Shares of Google’s parent Alphabet jumped 7.3% after the technology giant reported 23% revenue growth and topped estimates for earnings, boosted by Google’s recovering advertising business. Amazon reported earnings that nearly doubled Wall Street estimates, while delivering its biggest revenue of all time at $125.56 billion, pushing it past the symbolic $100 billion mark for the first time. Investors cheered a rebound in US employment last month. A report Wednesday from payroll processing firm ADP showed private firms added 174,000 jobs in January.

 

 

ASIA

Shares in Asia mostly dipped in early trade today following another positive session overnight for the S&P 500 stateside. Stocks in Australia slid as the S&P/ASX 200 fell 0.65%. Australia’s exports of goods and services in December rose 3% month-on-month on a seasonally adjusted basis, the country’s Bureau of Statistics announced today. Shares of South Korean automakers Hyundai Motor and Kia Motors rose 1.22% and 0.31%, respectively. That came after sources told CNBC that Apple is close to finalizing a deal with Hyundai-Kia to manufacture an Apple-branded autonomous electric vehicle at the Kia assembly plant in West Point, Georgia.

 

 

CURRENCIES

The rand strengthened early on Wednesday, clinging on to its previous gains, as global appetite for risk and high yields rose on optimism around vaccine rollouts. South Africa has seen slightly more inflows than other emerging markets back into local assets by foreign investors, largely a function of the high yield on offer with the central bank set to keep lending rates steady in 2021. By the close, the rand firmed 0.12% to R14.95 per dollar. The local currency was trading around R14.97 this morning.

 

 

COMMODITIES

Gold and silver prices edged lower this morning, weighed down by a stronger dollar, while investors awaited the passage of a massive stimulus package in the United States. Oil prices edged higher in early trade today after the OPEC+ alliance of major producers stuck to a reduced output policy at a meeting on Wednesday, and as crude stockpiles in the United States fell to their lowest levels since March last year. The Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, extended its current oil output policy at a meeting on Wednesday.

LOCAL COMPANIES

 

Distell Group (DGH) +7.7%

Group revenue increased by 3.8% alongside volume expansion of 0.8% compared to the previous 6 months ended 31 December 2019 (‘prior period’). In South Africa, although 41 trading days were lost due to the alcohol ban in the current period, the business was able to recover and achieve near flat revenues and a 1.4% volume decline. Category performance continues to reflect preferences towards spirits and mainstream wine, driven by in-home consumption and stockpiling in fear of unexpected alcohol bans in South Africa. Select premium ready-to-drink (RTD) brands also continue to perform well with gains in market share. In the rest of Africa, excluding BLNE countries (Botswana, Lesotho, Namibia and Eswatini), the Group recorded an impressive performance with      increased revenues and volumes of about 20% compared to the prior period. This was largely driven by Kenya (+17% Revenue, +9.8% Volume growth), Mozambique (+33.3% Revenue, +15% Volume growth) and Nigeria (+22.9% Revenue, +20.3% Volume growth) as a result of our continuous RTM investments. The international business performed strongly across all markets, with 15.4% revenue growth and significant margin improvement as the business capitalises on its premium whisky brands, improved online sales channels and historical investments in aged stock. Volumes declined by 9.1% as anticipated, given the cessation of sales of less profitable wine brands, bulk whisky and the exit of the RTD business.

 

Sappi (SAP) -1.5%

Despite the ongoing challenges of the Covid-19 pandemic (“Covid”), the group outperformed the guidance for EBITDA provided at the end of the last quarter as the profitability in all reporting segments exceeded expectations. EBITDA excluding special items for the quarter increased to US$98 million compared to US$82 million for the previous quarter. The improvement was due mainly to dissolving pulp (“DP”) markets and graphic paper demand in North America recovering at a faster rate than anticipated. These benefits were partially offset by the impact of the Ngodwana Mill maintenance shut, which had been rescheduled from the third quarter of last year, as well as the scheduled Somerset Mill maintenance shut. Net finance costs were US$34 million compared to US$20 million in the equivalent quarter last year. Net cash generated for the quarter was zero, compared to a cash outflow of US$278 million in the equivalent quarter last year, which included the purchase of the Matane Mill for US$158 million. Capital expenditure of US$82 million was lower than the US$112 million last year, which was mainly due to the timing of payments for the expansion of DP capacity at the Saiccor Mill.

INTERNATIONAL COMPANIES

 

Apple and Hyundai-Kia (AAPL) -0.8%

Apple is close to finalizing a deal with Hyundai-Kia to manufacture an Apple-branded autonomous electric vehicle at the Kia assembly plant in West Point, Georgia according to multiple sources who briefed CNBC on the plan. The so-called “Apple Car,” which is being developed by a team at Apple, is tentatively scheduled to go into production in 2024, though people familiar with the talks between Apple and Hyundai-Kia say the eventual rollout could be pushed back. Sources told CNBC no agreement has yet been reached between the two companies. In addition, they stress that Apple may ultimately decide to partner with another automaker separately or in addition to working with Hyundai. 

 

Microsoft (MSFT) +1.5%

Microsoft said Wednesday it would never threaten to leave Australia after Google suggested it could pull its widely used search engine from the country. Google made the threat last month after the Australian government proposed a new law that would force the tech giant to pay news publishers for the right to link to their content. “One thing is clear: while other tech companies may sometimes threaten to leave Australia, Microsoft will never make such a threat,” said Brad Smith, Microsoft’s president, in a statement. “We are committed to supporting the country’s national security and economic success.” Microsoft is well placed to capitalize from any fallout between Google and Australia. Google currently dominates search in the country, boasting a 94.5% market share, according to web analytics firm StatCounter, while Microsoft’s Bing holds just 3.6%. 

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