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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks on the Johannesburg Stock Exchange (JSE) traded lower for the second straight day as investors remained cautious on the heels of hot domestic May inflation data on Wednesday. Overall on the JSE, the All-Share index fell 0.63% to 65,295 points, while the Top-40 index closed 0.67% lower at 59,019 points. In other news, construction activity, as measured by the Afrimat Construction Index (ACI) released on Thursday, declined 3.5% in the first quarter of 2022. The index is a composite of the level of activity within the building and construction sectors.

EUROPEAN MARKET COMMENTARY

European stocks closed lower Thursday, as mounting fears of an impending recession weighed on investor sentiment. The pan-European Stoxx 600 closed 0.8% lower, with autos slumping 3.6% to lead the losses as most sectors and major bourses slipped into the red. In terms of individual share price movement, Deutsche Bank and Commerzbank led a broad slump in bank shares, each slipping around 12%. On the data front in Europe, flash estimates of French and German PMI (purchasing managers index) readings for June came in weaker than expected, adding to recession fears.

US MARKET COMMENTARY

US stocks climbed in a late-day rally as bond yields slipped, and Wall Street continued to weigh recession risks. A peek into the broader market index showed more defensive stocks such as consumer staples, utilities, real estate and health-care stocks drove outperformance, with each sector up about 2%. Meanwhile, energy was the worst performing sector in the S&P 500 as oil prices took a hit. Federal Reserve Chair Jerome Powell on Thursday reiterated that the central bank is “strongly committed” to bringing down inflation, as he spoke on monetary policy for a second day before Congress.

ASIAN MARKET COMMENTARY

Shares in the Asia-Pacific region were higher this morning as investors weigh recession fears. Hong Kong’s Hang Seng index jumped 1% in early trade, with the Hang Seng Tech index rising 1.7%. Meanwhile, core consumer prices in Japan rose 2.1% for the month of May compared to a year earlier, in line with estimates, according to Reuters. That’s above the Bank of Japan’s target of 2% inflation. However, consumer prices only rose 0.8% if fresh food and energy was taken out, Reuters said.

CURRENCY MARKET COMMENTARY

The rand weakened against the dollar on Thursday, as markets remained pressured by rising concerns of a recession in the United States. At the close of the session, the rand was trading around R16.00 to the dollar, 0.53% softer. The rand seemed little affected by South African government repealing COVID-19 rules due to a dissipating fifth wave of the pandemic, as investors continued to weigh the risk of steep interest rate rises amid fears of a global economic slowdown.

COMMODITIES MARKET COMMENTARY

Gold prices were flat today but on course for their second straight weekly decline, with worries over major central banks potentially implementing big interest rate hikes to target runaway inflation weighing on bullion demand. Oil prices traded sideways earlier this morning after briefly rising nearly $1 per barrel, as the market balanced fears of slower demand from cooling U.S. economic activity with supply uncertainty.

LOCAL COMPANIES

SEPHAKU HOLDINGS LIMITED (SEP) -4.8%

SepHold hereby reports on the summarised provisional audited financial results for the year ended 31 March 2022 (‘FY 2022’). SepHold, Métier Mixed Concrete (Pty) Ltd (‘Métier’ or ‘the subsidiary’) and Dangote Cement SA (Pty) Ltd (‘SepCem’ or ‘the associate’) are collectively referred to as the group.

Salient points

SepHold

    –        Group consolidated revenue*: R786 million (FY 2021: R634 million)

    –        Net profit after tax: R45 million (FY 2021: R20 million)

    –        Basic earnings per share: 17.52 cents (FY 2021: 7.83 cents)

    –        Headline earnings per share: 17.67 cents (FY 2021: 6.09 cents)

Métier

    –        EBITDA: R75 million (FY 2021: R55 million)

    –        EBITDA margin: 9.5% (FY 2021: 8.7%)

    –        Net profit after tax: R30 million (FY 2021: R17 million)

SepCem

    –        Sales revenue: R2,6 billion (FY 2021: R2,4 billion)

    –        EBITDA: R375 million (FY 2021: R382 million)

    –        EBITDA margin: 14.6% (FY 2021: 15.9%)

    –        Net profit after tax: R82 million (FY 2021: R44 million

    –        SepCem equity – accounted profit to group : R29 million (FY 2021: R16 million)

INTERNATIONAL COMPANIES

Netflix (NFLX) -7.8%

Netflix is laying off around 300 more employees across the company. The cuts, which represent about 3% of total employees, come about a month after the streaming company eliminated about 150 positions in the wake of its first subscriber loss in a decade. Netflix had warned investors in April that it would be pulling back on some of its spending growth over the next two years. Spencer Neumann, the company’s chief financial officer, said during the company’s earnings call in April that Netflix is trying to be “prudent” about pulling back to reflect the realities of its business. However, it still plans to invest heavily, including around $17 billion on content.

ByteDance

Chinese internet giant ByteDance’s nascent foray into gaming is showing signs of promise with spending across its mobile titles growing over the past year as it looks to challenge rivals Tencent and NetEase. The TikTok owner generated $1 billion of player spending across its mobile games between June 21, 2021 and June 20, 2022, a 16% increase from the same period last year, according to data analytics company Sensor Tower. This figure includes data from Apple’s App Store and Google Play, but not third-party Android stores in China. ByteDance, best known for it short video app TikTok and the Chinese version Douyin, has looked to aggressively expand into mobile gaming, an area that Tencent and NetEase have dominated in China.

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About the Author

Research Team
Media, Sasfin Wealth