Taking Stock - Local main indices hit another all-time peak.

In todays taking stock, we discuss how the Local main indices hit another all-time peak, led primarily by the US stimulus package.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local main indices hit another all-time peak, continuing their five-day winning streak, led primarily by hope a US stimulus package will channel money into emerging market stocks. But the upward move on Tuesday was marginal as investors worried about South Africa's inability to start its first phase of COVID-19 vaccinations and hence its prospect of a faster economic rebound. The benchmark All-Share index was up by 0.16% at the day's end (closing at 65,163 index points) while and the blue-chip Top-40 companies index ended 0.03% up. The rally was driven by real estate and consumer retail companies, which helped offset a dampening mood.

 

EUROPEAN MARKET COMMENTARY

European stocks closed slightly lower on Tuesday as the rally that’s seen global stocks nudging to record highs appeared to be cooling. The pan-European Stoxx 600 ended the session down by about 0.1%, with most sectors and major bourses finishing in negative territory. The lacklustre trade in Europe comes after a global rally on Monday that saw US stocks hit record highs. In Europe, the coronavirus pandemic and vaccine rollout continue to dominate headlines and market sentiment.

 

US MARKET COMMENTARY

The S&P 500 dipped slightly from a record high on Tuesday as the market’s strong rally in February took a pause. Investors could be taking some chips off the table following a strong rally boosted by optimism for a smooth reopening amid the COVID vaccine rollout. Cyclical sectors, which had outperformed in recent weeks, led the declines. Energy fell 1.5%, paring its month-to-date gains to 11.1%. Materials also registered losses.

 

ASIAN MARKET COMMENTARY

Asian stocks hit a record high today, as upbeat earnings, hopes of a large US fiscal stimulus and progress in vaccinations fanned optimism about a global recovery from the pandemic. In mainland China’s CSI300 rose 1.3% to a 13-year high and the Shanghai Composite hit a five-year high on the last trading day before the week-long lunar new year holidays.

 

CURRENCY MARKET COMMENTARY

The rand strengthened on Tuesday, recovering from a slip in the previous session, as optimism about the passing of a $1.9 trillion stimulus programme in the United States boosted risk demand. At the close, the rand was 1.02% firmer at R14.88 against the dollar, in line with gains in most emerging market currencies. The local currency was trading around R14.72 this morning. The dollar traded near two-week lows as demand for safer assets ebbed on Wednesday, with traders looking ahead to an expected recovery from the COVID-19 pandemic this year, driven by massive fiscal and monetary stimulus.

 

COMMODITIES MARKET COMMENTARY

Gold prices edged up this morning as the dollar hovered around a one-week low and expectations of a massive stimulus package in the United States lifted bullion's appeal. Investors now await Federal Reserve Chairman Jerome Powell's speech before a virtual Economic Club of New York event later today. Oil prices rose again today, extending their more than week-long rally after industry data showing a fall in US crude oil stocks added to optimism about an expected rise in global fuel demand.

LOCAL COMPANIES

MTN Group (MTN) +3.9%

MTN Group said on Tuesday it will sell its 20% shareholding in Belgacom International Carrier Services SA (BICS) to Belgian state-controlled telecoms firm Proximus for R1.8 billion ($121.41 million). MTN is in the midst of a R25 billion divestment plan aimed at reducing debt, simplifying its portfolio and improving returns over the next three to five years. Proximus is the majority owner of BICS, whose equipment handles global calls, text and internet traffic across the world. Another minority owner, Swisscom is also selling its 22.4% stake in BICS to Proximus it said on Tuesday. MTN said it intends to use the proceeds to pay down US dollar debt and for general corporate purposes. At September 30, group net debt was R60.6 billion. MTN will record a profit on the disposal of around R1.2 billion during the first half of 2021, it added.

 

 Impala Platinum (IMP) -0.1%

Implats’ headline earnings for the period are expected to increase by between 318% and 338% to between R14.105 billion and R14.780 billion from R3.378 billion in the comparative period. Headline earnings per share (“HEPS”) are expected to increase by between 316% and 336% to between 1 812 cents and 1 899 cents per share compared to the 436 cents per share in the comparative period. The increase in earnings was partially offset by a once-off non-cash IFRS2 BEE charge of R1.5 billion, or 194 cents per share (no tax impact), arising on the Marula BEE loan refinancing. Basic earnings for the period are expected to increase by between 627% and 647% to between R24.740 billion and R25.420 billion compared to R3.403 billion in the comparative period. Basic earnings per share (“EPS”) for the period are expected to increase by between 624% and 644%, to between 3 178 cents and 3 265 cents per share compared to 439 cents per share in the comparative period. This includes the aggregate impact of the reversal of impairment losses on property, plant and equipment and the prepayment of royalties of R10.6 billion or 1 362 cents per share (post-tax) recognised in prior periods.

INTERNATIONAL COMPANIES

Total (FP) -1.8%

France’s Total on Tuesday reported a massive drop in full-year profit, following a tumultuous 12 months in which commodity prices collapsed amid the coronavirus pandemic. The energy major said full-year 2020 net profit came in at $4.06 billion, beating expectations of $3.86 billion from analysts polled by Refinitiv. It compared with $11.8 billion for the 2019 fiscal year, reflecting a drop of 66% year-on-year. Total also posted fourth-quarter net profit of $1.3 billion, beating analyst expectations of $1.1 billion. Shares of Total are up around 0.8% year-to-date, having tumbled more than 28% last year. “Total faced two major crises in 2020: the Covid-19 pandemic that severely affected global energy demand, and the oil crisis that drove the Brent price below $20 per barrel in the second quarter,” Total CEO Patrick Pouyanne said in a statement. Total said it would propose a fourth-quarter dividend payout of 0.66 euros ($0.8) per share, in line with previous quarters, and set the dividend for 2020 at 2.64 euros per share.

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