Taking Stock - MTN is in talks with buyers for Afghani wireless unit

In todays taking stock, we discuss how MTN is said to be in talks with buyers for Afghani wireless unit.

Research Team

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Sasfin Wealth
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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

The Johannesburg Stock Exchange's Top-40 Index was down 1.6% to 59,379 points and the broader All-Share Index closed 1.5% lower at 65,525 points. Miners were the biggest losers on the blue-chip index, hurt as the gold price slipped to a two-week low. The stronger dollar and higher U.S. Treasury yields outweighed the boost to the precious metal from deepening concerns about global economic growth. Gold Fields fell 4.4%, AngloGold Ashanti dropped 3.4% and Sibanye Stillwater lost 3.3%.

 

 

EUROPEAN MARKET COMMENTARY

European stocks closed lower on Wednesday, reflecting cautious trade in global markets amid nervousness over economic growth and a resurgence in Covid cases. The pan-European Stoxx 600 provisionally ended the session down 1%, with autos dropping 2.2% to lead losses as most sectors and major bourses dipped into negative territory. European investors are erring on the side of caution ahead of today’s European Central Bank meeting. A recent spike in euro zone inflation and an uptick in economic indicators has led some market watchers to anticipate a more hawkish tone from policymakers.

 

 

US MARKET COMMENTARY

The Dow Jones Industrial Average and S&P 500 fell for a third straight day on Wednesday as investors reassess the economic growth outlook following a smooth ride in the market so far this year. On Wednesday, the Labor Department released the Job Openings and Labor Turnover Survey, which showed job openings rose to a record 10.9 million in July. Job openings outnumbered the unemployed by more than 2 million in July as companies struggled to fill a record number of vacancies.

 

 

ASIAN MARKET COMMENTARY

Shares in Asia-Pacific fell in early morning trade today as investors reacted to the release of China’s August inflation data. China’s consumer price index rose 0.8% year-on-year in August, compared to expectations for a 1% increase in a Reuters poll. Meanwhile, the producer price index jumped 9.5% from a year ago, as compared to forecasts of a 9% rise in a Reuters poll. In Hong Kong, shares of Tencent and Netease dropped 4.79% and 6.31% respectively, after Chinese state media reported that the two were among video game firms summoned to a meeting with regulators.

 

 

CURRENCY MARKET COMMENTARY

The rand drifted higher on Wednesday, defying a strong dollar and risk-off sentiment as the country's central bank governor made the case for a tighter inflation target. At the close of the session, the rand was trading around R14.20 versus the dollar or 0.86% firmer. Elsewhere, investors were moving away from riskier assets over uncertainty over the pace of economic recovery, lifting the greenback, which the rand tends to track. Investors will also be watching domestic data releases on Thursday, including second-quarter current account and July manufacturing numbers, following Tuesday's GDP reading of 1.2% growth in April-June quarter on quarter.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices held near two-week lows this morning, pressured by a stronger U.S. dollar, while investors awaited a policy decision by the European Central Bank (ECB) due later in the day. Oil prices rose for a second session earlier today, recovering from earlier losses as a decline in U.S. Gulf of Mexico output following damages from Hurricane Ida underpinned the market. U.S. crude oil production is expected to fall by 200,000 barrels per day in 2021 to 11.08 million bpd, the U.S. Energy Information Administration (EIA) said on Wednesday, noting that Hurricane Ida should force a bigger decline than its previous forecast for a drop of 160,000 bpd.

LOCAL COMPANIES

FSCA hits Viceroy with R50m penalty for false, misleading statements on Capitec

The Financial Sector Conduct Authority (FSCA) has slapped a R50-million administrative penalty on Viceroy Research and three partners – Aiden Lau, Fraser John Perring and Gabriel Bernarde – for publishing “false, misleading or deceptive” statements about Capitec Bank in 2018 that caused its share price to drop by 23%. The FSCA says Viceroy Research and its partners had contravened Section 81 of the Financial Markets Act, which makes it an offence to publish false or misleading statements about securities and which the author “ought reasonably to know” is false, misleading or deceptive. The act also makes it an offence to omit material facts about securities that could lead to making false or misleading conclusions about securities. Once made aware of false or misleading statements in the course of research, the author must, without delay, publish a correction. FSCA Commissioner Unathi Kamlana told journalists on Wednesday that Viceroy Research was alerted to the fact that its research on Capitec Bank was based on false or misleading assumptions, yet it failed to issue a correction when this was brought to its attention. The FSCA did not name the partner who had taken a short position in Capitec shares. The regulator says some of the factors determining the size of the fine were the need to deter this type of conduct in the future, the seriousness of the contravention, the losses suffered by Capitec shareholders (while Viceroy and its partner benefitted financially), and the impact the report had on SA’s financial system.

 

MTN (MTN) -2.3%

MTN Group is in talks with potential international buyers for its wireless business in Afghanistan, a bid to accelerate plans to exit the country, according to people familiar with the matter. Africa’s biggest mobile-phone operator, the market leader in Afghanistan with a 40% share, is in discussions with several parties, said the people, who asked not be identified as the negotiations are ongoing. MTN announced just over a year ago a plan to exit countries in the Middle East over the medium term, enabling the Johannesburg-based company to focus on African markets. The carrier has since abandoned its operation in Syria, citing regulatory demands that made operating there untenable, though said last month it’s still evaluating options in Yemen and Afghanistan. The carrier declined to comment on market speculation. Telecom companies operating in Afghanistan, which also includes Etisalat of the United Arab Emirates, have reassured customers and investors they are keeping services running following the collapse of the US-backed government last month, while trying to secure the safety of their employees in the country.

INTERNATIONAL COMPANIES

GameStop (GME) -0.1%

Shares of video game retailer GameStop fell more than 7% in extended trading Wednesday after the company reported its second-quarter loss narrowed on a year-over-year basis. The retailer did not provide an outlook for the coming quarters or take questions during its earnings conference call. It was the first call since CEO Matthew Furlong and CFO Mike Recupero joined GameStop’s leadership. For the quarter ended July 31, the company reported a net loss of $61.6 million, or 85 cents per share. In the year-earlier period, GameStop reported a loss of $111.3 million, or $1.71 per share. On an adjusted basis, GameStop lost 76 cents per share.

 

Lululemon (LULU) -1.5%

Lululemon shares surged more than 13% in extended trading Wednesday after the athletic apparel maker reported fiscal second-quarter profit and revenue that topped analysts’ expectations. Consumers are shopping Lululemon stores and the company’s website for its sports bras, jogger pants and leggings for their stay-at-home wardrobes. But many are also seeking out stretchy pants and comfortable clothing as they return to the office. The shift toward so-called athleisure is benefiting retailers such as Lululemon and Nike. Net income for the three-month period ended Aug. 30 rose to $208.1 million, or $1.59 per share. That’s up from $86.8 million, or 66 cents per share, a year earlier. Excluding one-time items, the company earned $1.65 per share. That’s better than the $1.19 that analysts polled by Refinitiv had been looking for.

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Research Team
Media, Sasfin Wealth