TSMC Q2 Revenue Soars on AI Demand, Exceeds Market Expectations

LOCAL MARKET COMMENTARY

On the Johannesburg Stock Exchange, the blue-chip Top 40 index and the broader All Share index closed 0.14% and 0.22% lower, ending Wednesday at 73,478 and 80,445 points, respectively. Local investors are keenly watching monthly mining and manufacturing data for insights into the South African economy's health. Electricity and Energy Minister Kgosientsho Ramokgopa is working on a roadmap to overhaul the struggling electricity distribution industry, which will address issues such as municipal debt to Eskom, insufficient investment in municipal grids, high tariffs, energy theft, vandalism, and technical losses.

EUROPEAN MARKET COMMENTARY

European stocks closed higher on Wednesday, with the Stoxx 600 index up 0.93% as most sectors gained, led by retail stocks rising 1.6%, while chemicals slipped 0.18%. This followed a lower close on Tuesday due to political uncertainty in France after the left-wing New Popular Front (NFP) won the most seats in Sunday’s election but fell short of a majority. The NFP is pushing for President Emmanuel Macron to let it form a government and choose the next prime minister. Despite this, France’s CAC 40 index rose 0.86% as traders considered the effects of a hung parliament.

US MARKET COMMENTARY

The Nasdaq and S&P 500 reached record highs on Wednesday, driven by gains in Nvidia and other major stocks ahead of key inflation data and quarterly earnings reports. Federal Reserve Chair Jerome Powell, in his Congressional testimony, expressed some confidence in inflation trends but wasn't ready to confirm a sustainable move down to 2%. Important U.S. inflation data, including the Consumer Price Index today and the Producer Price Index on Friday, are due this week. The second-quarter earnings season starts with major banks reporting on Friday, which will test if high-performing megacaps can maintain their strong valuations.

ASIA MARKET COMMENTARY

Japan's Nikkei 225 surged past the 42,000 mark for the first time this morning, rising 0.97% due to strong performance in technology stocks, amid a broader rally in Asia-Pacific markets driven by gains in U.S. Big Tech. However, core machinery orders in Japan fell 3.2% month-on-month for the second consecutive month, against expectations of a 0.8% rise, signalling potential economic fragility and complicating the Bank of Japan's monetary policy plans. On a year-on-year basis, machinery orders grew by 10.8%, surpassing the 7.2% increase forecasted by Reuters.

CURRENCY MARKET COMMENTARY

The South African rand strengthened on Wednesday against a weaker dollar, with attention on the future interest rate direction of the U.S. economy. This morning, the dollar dipped slightly but remained mostly steady ahead of the U.S. inflation report. Meanwhile, the British pound firmed as expectations for an August rate cut from the Bank of England diminished.

COMMODITY MARKET COMMENTARY

Gold prices remained stable this morning as investors awaited U.S. inflation data for clues on the Federal Reserve's future interest rate decisions. Meanwhile, oil prices inched up as U.S. crude stocks declined, driven by increased refinery processing and a reduction in gasoline inventories, indicating stronger demand.

Tharisa PLC (THA) -2.40%

Tharisa, a mining company listed in Johannesburg and London, reported its Q3 FY2024 results, highlighting improved safety with low injury rates. PGM (platinum group metals) production rose to 36.9 thousand ounces, and chrome production increased to 410.2 thousand tons. Prices for these metals also saw a slight increase. The company's cash reserves grew to $189.9 million, while its debt decreased, resulting in a better net cash position of $92.2 million. Additionally, Tharisa is on track with a $5 million share repurchase program. The company maintains its production targets for the year.

Barloworld Limited (BAW) +0.45%

Barloworld shareholders should note that ongoing discussions, mentioned in announcements on April 15 and May 27, 2024, could significantly impact the company's stock price if successful. There is no certainty that an agreement will be reached, so shareholders should remain cautious when trading Barloworld securities until further notice.

Ethio Telecom (Not Listed)

Ethiopian state-owned telecom company Ethio Telecom reported a more than 20% increase in both full-year revenue and net profit for the year ending in June. Revenue grew by 22% to 93.7 billion birr ($1.63 billion), and net profit rose by 21% to 21.79 billion. The company also saw a 9% increase in total subscribers, reaching 78.3 million, and a significant rise in its financial service Telebirr's subscribers to 47.55 million from 34.3 million. Prime Minister Abiy Ahmed mentioned in February that the government is considering selling 10% of Ethio Telecom through a local stock exchange set to launch this year.

Taiwan Semiconductor Manufacturing Company Limited (2330) +0.48%

TSMC, the world's largest contract chipmaker, reported strong second-quarter revenue growth driven by high demand for AI applications, surpassing market forecasts. Revenue for April-June 2024 was T$673.51 billion ($20.67 billion), beating the analyst estimate of T$654.27 billion and marking a 32% increase from the previous year. June alone saw a 33% year-on-year revenue rise to T$207.87 billion. TSMC's strong performance, fuelled by customers like Apple and Nvidia, has helped its share price reach record highs. TSMC's shares, which have risen 76% this year, closed up 0.5% on Wednesday, while its ADRs surged 4.8% to a record $192.79 on Monday, briefly valuing the company at $1 trillion. The company will report second-quarter earnings on July 18 and is expected to announce a 30% rise in net profit.

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