Taking Stock - sale of a 2% stake in software group Tencent.

In todays taking stock, we discuss how Prosus NV announced the sale of a 2% stake in software group Tencent, worth about $15 billion.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks fell, led by market heavyweight Naspers and technology investment company Prosus NV after it said it will sell a 2% stake in software group Tencent, worth about $15 billion at current prices, in what could potentially be the biggest block trade on record. Dutch-based Prosus is majority-owned by Naspers. Its Johannesburg-listed shares fell by 4.12% to 67,160, while Naspers declined 5.03%. The Johannesburg All-Share index closed 1.33% weaker, while the Top-40 index fell 1.54%.

 

 

EUROPEAN MARKET COMMENTARY

European stocks closed slightly lower on Wednesday as investors assess recovery hopes and economic data. The pan-European Stoxx 600 ended the session down by 0.2%, with health care stocks shedding 0.9% to lead losses while the insurance sector gained 0.6%. Britain’s FTSE 100 bucked the downward trend to climb 1%. The export-heavy index was boosted by a weakening of the pound against the dollar and optimism over the swift progress of vaccine rollouts across the UK. On the data front, IHS Markit’s final euro zone composite purchasing manager’s index (PMI) on Wednesday showed business activity in the bloc bouncing back in March despite a reintroduction of restrictions in several countries.

 

 

US MARKET COMMENTARY

The S&P 500 gained slightly to hit a record high on Wednesday as minutes from the Federal Reserve’s last meeting showed the central bank’s commitment to accommodative policy in order to support a full economic recovery. Shares of reopening plays airlines and cruise lines led the gains, continuing their recent run. Carnival climbed 1.4%, while Royal Caribbean and Norwegian Cruise Line also rose. Shares of United Airlines rose slightly as well. JPMorgan Chase CEO Jamie Dimon was optimistic about the US economic comeback from the pandemic in his widely read annual letter released on Wednesday.

 

 

ASIAN MARKET COMMENTARY

Stocks in Asia-Pacific trade mixed this morning after the S&P 500 nudged higher to a record closing high overnight. Shares in Australia led gains among the region’s major markets, with the S&P/ASX 200 up 1.18%. Miners and banks helped the ASX 200 crack 7000 points for the first time in 13 months. MSCI’s broadest index of Asia-Pacific shares outside Japan sat below the flatline.

 

 

CURRENCY MARKET COMMENTARY

The rand edged lower on Wednesday in cautious trade as investors awaited local and international signals with little to drive a move in either direction. At the close, the rand was 0.26% weaker at R14.56 versus the dollar. The muted activity was reflected in other emerging market currencies, with most units trading sideways amid concerns about a resurgence of coronavirus infections and lower commodity prices. Soft data on purchasing managers and business sentiment also wobbled the rand's recent rally to a five-week peak. Private sector activity expanded marginally in March and business sentiment slipped in the same month.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices slipped this morning as investors turned to riskier assets after the US Federal Reserve's latest meeting minutes indicated continued policy support and cemented hopes of a quick economic turnaround. Oil prices fell today after official figures showed a big increase in US gasoline stocks, causing concerns about demand for crude weakening in the world’s biggest consumer of the resource at a time when supplies around the world are rising. While crude stocks in the United States fell more than forecast by analysts, gasoline inventories jumped sharply, also against expectations, the Department of Energy said on Wednesday.

LOCAL COMPANIES

Prosus (PRX) -4.1%

Dutch-based technology investment company Prosus NV is to sell a 2% stake in software group Tencent, worth about $15 billion at current prices, in what could potentially be the biggest block trade on record. Prosus, majority owned by Naspers of South Africa, said on Wednesday the sale to institutional investors would lower its stake in Tencent to 28.9% from 30.9%. The move highlights the size of Prosus’s Tencent stake, which the Dutch company said it had committed not to reduce further in the next three years. “The proceeds of the sale will increase our financial flexibility, enabling us to invest in the significant growth potential we see across the group, as well as in our own stock,” CEO Bob van Dijk said in a statement. The company said it had informed Tencent of its intention before Wednesday’s announcement. It expects to complete bookbuilding for the deal before Asian markets reopen on Thursday. The sale looks set to be the largest block trade on record, based on Refinitiv data. Based on an offer document, Prosus is selling Tencent shares at HK$575.00-595.00, a 5.5-8.7% discount to its closing price of HK$629.50 ($80.87), and implying proceeds of $14.2-14.7 billion at current exchange rates. In addition to its Tencent stake, Prosus owns or invests in online food delivery platforms, classified marketplaces and digital payments businesses. For the half-year ended September 30, Prosus reported a 29% increase in core earnings to $2.2 billion, as proceeds from Tencent offset losses at its other online businesses. Citigroup, Goldman Sachs and Morgan Stanley are joint global coordinators of the stake sale. The largest previous block trade on record was also a sale of 2% of Tencent shares, then held by Naspers, for $9.8 billion in 2018, Refinitiv data showed.

INTERNATIONAL COMPANIES

Amazon (AMZN) +1.7%

More than 3,200 ballots were cast in a high-stakes union election at one of Amazon’s Alabama warehouses, according to the Retail, Wholesale and Department Store Union. The election was open to more than 5,800 employees at Amazon’s Bessemer, Alabama, warehouse, who are voting whether to join the RWDSU. With 3,215 total ballots cast, that resulted in a turnout rate of roughly 55%, which is higher than what the RWDSU initially estimated. Workers had until March 29 to submit their ballots via mail. Vote counting began last week via a private video conference, presided over by the NLRB, during which Amazon and the union could contest ballots based on factors like an illegible signature or whether a person’s job classification entitles them to vote. The public portion of the vote count is expected to begin as soon as Thursday or Friday morning, the RWDSU said. Hundreds of ballots were challenged, mostly by Amazon, according to the RWDSU. If the margin of victory ends up being less than the total number of challenged ballots, the final tally will be temporarily halted until those challenges are resolved via a hearing held by the NLRB. Any ballots that are accepted will then be added to the tally. There could still be further legal challenges in store, as either Amazon or the union have the opportunity to challenge the election results, which could further delay the outcome.

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Research Team

Media, Sasfin Wealth

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