LOCAL MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange rose yesterday, with the prominent Top-40 index concluding 0.73% higher and the All Share gained 0.62% to close at 74,106. In corporate developments, Sun International and City Lodge Hotels have both observed increased demand for their hotel rooms, leading to elevated room rates and occupancy rates. Sun International unveiled its latest interim results, while City Lodge Hotels released its full-year results to investors on Monday. Notably, City Lodge Hotels achieved a significant 18-percentage point growth in occupancy rates, reaching 56% for the fiscal year ending in June 2023, a substantial improvement from the 38% occupancy rate recorded in 2022. For Sun International, the resorts and hotels division reported an average accommodation occupancy rate of 66.8%, a notable increase from the 57% reported during the same period in the previous year. 

EUROPEAN MARKET COMMENTARY

European stock markets closed higher on Monday, with the benchmark Stoxx 600 index ending up by 0.3%. However, it retreated from earlier gains of up to 0.9% during the session. Investors were anticipating a week filled with significant economic data releases worldwide. The European Commission adjusted its annual growth forecast for the European Union downwards in its Summer 2023 Economic forecast, revising it to 0.8% from the previous estimate of 1%. Additionally, the Commission lowered its growth projection for 2024 to 1.4%, down from the earlier forecast of 1.7%. While it reduced its expectation for consumer price inflation in 2023 to 6.5% from 6.7%, it slightly increased the 2024 forecast to 3.2% from 3.1%. 

US MARKET COMMENTARY

US stocks climbed on Monday, kicking off a week filled with inflation data, as investors showed renewed interest in tech stocks following recent declines. Tesla shares surged by 10% following a Morgan Stanley upgrade, which forecasted a substantial rally due to advancements in its autonomous software. The bullish sentiment was further bolstered by a report from The Wall Street Journal suggesting a consensus among the Federal Reserve not to raise rates in the upcoming meeting next week. Investors are eagerly awaiting crucial inflation data after stronger-than-expected economic indicators last week raised concerns about the possibility of the Federal Reserve increasing rates beyond previous expectations.

ASIA MARKET COMMENTARY

This morning, most Asia-Pacific markets experienced declines. Chinese real estate developer Country Garden Holdings saw its shares initially surge by nearly 9% before retracing some gains. This surge followed reports that the company's creditors had voted to extend repayments on six onshore bonds by three years. In other news, chip designer Arm is reportedly nearing the achievement of sufficient investor support to reach its desired fully diluted valuation of $54.5 billion in its upcoming initial public offering. This suggests that Arm is likely to price the IPO either at the top or above the $47-to-$51-per-share range, as reported by sources familiar with the matter cited by Reuters.

CURRENCY MARKET COMMENTARY

On Monday, the South African rand continued to strengthen against a weaker U.S. dollar, benefiting from positive economic data from China that provided support to several emerging market currencies. Meanwhile, the Japanese yen stabilized near a one-week high following remarks from Japan's top central banker regarding the potential termination of its negative interest rate policy, impacting market sentiment. At the same time, the U.S. dollar saw a modest recovery in its value.

COMMODITY MARKET COMMENTARY

Gold prices remained stable as investors awaited the release of U.S. inflation data, which could influence interest rate expectations following the Federal Reserve's willingness to consider further policy tightening. Meanwhile, Brent crude oil prices held their ground as investors monitored upcoming macroeconomic data, scheduled for later this week, to gauge whether Europe and the U.S. would continue to raise interest rates.

Sun International (SUI) +6.82%

In the key group highlights, there was a significant increase in income, rising by 11.7% to reach R5.8 billion. Basic earnings surged by 81.9%, reaching 171 cents per share, while headline earnings also saw a notable 86.0% increase, reaching 173 cents per share. Adjusted headline earnings exhibited a 10.1% growth, totalling 197 cents per share. Additionally, the interim dividend increased substantially by 68.2%, reaching 148 cents per share.

Bell Equipment (BEL) -1.46%

For the six months ending on June 30, 2023, there were significant improvements in the financial performance compared to the same period in 2022. Revenue surged by 42% to R6,004,256, while profit from operating activities increased by 74% to R535,881. Profit for the period also showed a remarkable growth of 66%, reaching R348,908. Despite a net cash outflow of R397,818 for the period (compared to R176,716 in 2022), earnings per share (basic) increased by 64% to 343 cents, and headline earnings per share (basic) rose by 63% to 343 cents. The net asset value per share grew by 23% to 5,134 cents, while no dividends per share were declared for this period. 

Transaction Capital (TCP) +0.14%

Management at SA Taxi has made significant strides in restructuring the company's operations and balance sheet, resulting in a more stable business. However, the associated non-recurring costs incurred during this restructuring will have an impact on Transaction Capital's full-year core earnings per share (EPS), headline earnings per share (HEPS), and basic EPS. WeBuyCars is expected to see its earnings for FY2023 decline by approximately 20% compared to the previous year, in line with its half-year performance. Following the agreement with Standard Bank, Gomo is poised for substantial growth over the coming years. Nutun's FY2023 earnings are projected to increase compared to the prior year, albeit at a slower rate than initially communicated.

Smucker (SJM) -7.01%

J.M. Smucker, known for its jelly products, is acquiring Hostess Brands, the maker of Twinkies, in a deal worth $5.6 billion, equivalent to $34.25 per share. Hostess shareholders will receive $30 in cash and approximately 0.03002 shares of Smucker's stock for each Hostess share they own, with Smucker also taking on Hostess' debt, amounting to around $900 million. The transaction is anticipated to close during Smucker's fiscal third quarter, concluding in January. This acquisition reflects a broader trend in the food industry, as major players seek growth opportunities following the easing of the Covid pandemic. Campbell's Soup recently announced its purchase of Sovos Brands, the owner of Rao's pasta sauce, for $2.7 billion, while Mars, the owner of M&M's, acquired Kevin's Natural Foods in July, and Unilever acquired frozen yogurt brand Yasso in June.

Qualcomm (QCOM) +3.90%

Qualcomm has announced a new agreement with Apple, securing its position as a supplier of 5G chips for Apple's products until at least 2026. This extended deal, which was unexpected, comes at a time when Apple is facing increased challenges in the Chinese market and is looking to strengthen its supply chains in other regions. It's noteworthy that Apple has chosen not to rush the development of its own modem technology, despite its transition to using its custom-designed processing chips in all its computers. This agreement extends a multi-billion-dollar relationship between the two companies for an additional three years beyond previous expectations. Qualcomm had previously signed a chip supply agreement with Apple in 2019, following the resolution of a long-standing legal dispute between them. This earlier supply agreement is set to conclude this year, making the upcoming iPhone launch the last one under that particular deal.

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