Taking stock - LG Electronics plans to close down

In todays Taking stock, we discuss LG Electronics plans to close down its loss-making smartphone business.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange rallied on Thursday, ending the week on a higher note as financial markets in South Africa closed for a four-day long weekend. The markets were buoyed on the back of stabilising US treasury yields and a massive multi-trillion-dollar infrastructure package by President Joe Biden to boost local growth. The benchmark All-Share index went up 1.13% to 67,236, while the blue-chip Top 40 index closed up 1.16%. On Thursday, a survey showed manufacturing activity expanded for a third month in a row in March. Separately, data showed new vehicles sales were up by nearly 32% in March.

 

 

EUROPEAN MARKET COMMENTARY

European stocks closed higher on Thursday amid a raft of data releases from the region. The pan‑European Stoxx 600 ended the session up 0.6%, with tech stocks climbing 2% to lead gains as almost all sectors and major bourses closed in positive territory. Euro zone manufacturing activity grew at its fastest pace on record in March, with IHS Markit’s final manufacturing PMI coming in at 62.5 compared to February’s 57.9. The bounce was led by Germany, which notched a reading of 66.6 thanks to resurgent demand from the US and China. However, German retail sales in February fell short of economist expectations to rise by 1.2%, a full 9% below the same time last year.

 

 

US MARKET COMMENTARY

US stocks climbed to record highs on Monday as a strong bounce in US job growth and solid data in the services sector raised expectations for a swift economic recovery from the pandemic. The Labor Department reported Friday that nonfarm payrolls increased by 916,000 in March, the highest since August 2020, while the unemployment rate fell to 6%. Economists surveyed by Dow Jones were expecting an increase of 675,000 and a jobless rate of 6%. Meanwhile, a measure of US services industry activity soared to a record high in March. The Institute for Supply Management’s non-manufacturing activity index jumped to a reading of 63.7 last month, the highest level in the survey’s history.

 

 

ASIAN MARKET COMMENTARY

Asia’s stock markets rose on Tuesday as another batch of strong US economic data bolstered the global outlook, while currency and bond markets paused for breath after a month of rapid gains in the dollar and in US Treasury yields. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.4% to a two-week high, while Tokyo’s Nikkei loitered just short of a two-week peak. The Shanghai Composite was steady, while Hong Kong’s stock market remains closed for holidays.

 

 

CURRENCY MARKET COMMENTARY

The rand extended gains against the US dollar on Thursday, as positive manufacturing activity and new vehicle sales data pointed to a recovery in the economy. At the close, the rand was trading around R14.64 to the dollar pr 0.9% firmer. This morning saw the local currency trade around the R14.58 to the dollar, 0.28% weaker than its close yesterday at R14.55. The dollar sank to an almost two-week low versus a basket of its peers today, moving in tandem with retreating Treasury yields from recent peaks despite signs of a robust US economic recovery.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices rose this morning, as a weaker dollar made bullion cheaper and more attractive for buyers outside the United States, while a pull-back in US Treasury yields provided further support. Meanwhile, oil prices rose this morning as a drop in the US dollar made crude a more attractive buy, paring losses of more than 4% incurred overnight on the prospect of producers returning more than 2 million barrels per day of supply to the market by July. Adding to positive sentiment, England is set to ease coronavirus pandemic restrictions on April 12, with the opening of businesses including all shops, gyms, hair salons and outdoor hospitality areas.

LOCAL COMPANIES

Naspers (NPN) +5.3%

Africa’s largest company, Naspers Ltd, has hired a top Airbnb and former Amazon executive to lead its global online classifieds business, it said on Thursday, as the technology investor looks to shore up contributions from core businesses. The company’s online classifieds business, clubbed under OLX Group, contributes 5% to overall revenues and is the biggest among an array of businesses such as payments and fintech, food delivery and education technology. However, its size is largely overshadowed by Naspers’ blockbuster investment in Chinese tech giant Tencent Holdings, which owns China’s biggest messaging app, WeChat, and accounts for more than three-fourths of its revenues. Romain Voog, who was the vice president for worldwide sales operation and geographies at Airbnb, has joined Prosus NV from April 1 as the chief executive officer of OLX Group, it said in a statement. Prosus is a Naspers subsidiary that houses all of its overseas assets including Tencent and online classifieds business, which is spread across 30 countries. Voog was the president of Amazon’s operations in France before his stint at Airbnb. He takes over from Martin Scheepbouwer, who led OLX Group for nine years, the company said. “His (Voog’s) experience inside customer-centric organisations such as Amazon and Airbnb will be an asset to OLX Group as we drive customer-centric innovation in the world of classifieds,” said Bob van Dijk, CEO of Prosus and Naspers, in an emailed response to Reuters.

INTERNATIONAL COMPANIES

LG (066570) +4.2%

LG Electronics said on Monday it would close down its loss-making smartphone business. In January, the South Korean electronics giant said it was looking at all options for the division after almost six years of losses totalling around $4.5bn (£3.3bn). LG had made many innovations including ultra-wide-angle cameras, rising to third largest smartphone maker in 2013. But bosses said the mobile phone market had become "incredibly competitive". While Samsung and Apple are the two biggest players in the smartphone market, LG has suffered from its own hardware and software issues. As LG struggled with losses it had held talks to sell part of the business but these fell through. It still ranks as the third most popular brand in North America but has slipped in other markets. LG phones are still fairly common in its domestic South Korean market.

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Research Team

Media, Sasfin Wealth

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