Volkswagen Braces for a Tough Year

Local Market Commentary

The Top 40 index fell 0.24% to 79,733.8 points, while the All Share index lost 0.23% to close at 87,091.0 points, as investors awaited the delayed budget presentation amid coalition disagreements over a proposed VAT hike. Absa projected mid-single-digit revenue growth for 2025, with lower bad loans following a 10% rise in annual profit. J.P. Morgan downgraded South African equities to "neutral" from "overweight," citing concerns over economic slowdown and policy effectiveness. Meanwhile, the SARB governor expects GDP growth near 2% in 2025, while the government plans a second wave of reforms focused on state enterprises and infrastructure investment.

European Market Commentary

European equities fell to a one-month low on Tuesday as heightened trade tensions, triggered by President Trump’s decision to double tariffs on Canadian steel and aluminium imports to 50%, raised concerns over economic growth. The STOXX 600 dropped 1.7%, marking its fourth consecutive session of losses—the longest losing streak since December. Eurozone equity volatility surged to a seven-month high as investors reacted to escalating trade risks. Meanwhile, diplomatic developments continued, with Ukraine signalling support for a proposed 30-day ceasefire in talks with the U.S.

U.S. Market Commentary

U.S. equities declined on Tuesday, extending the sharpest selloff in months as investors reacted to escalating tariff threats and their potential impact on global growth. The S&P 500’s recent drop erased over $1.3 trillion in market value, with cumulative losses reaching $4 trillion from its peak. The Nasdaq confirmed a 10% correction last week, reflecting heightened volatility. Markets briefly stabilised following progress toward a Ukraine-Russia ceasefire and the U.S. resuming military aid to Kyiv. Additional support came from Ontario’s decision to suspend a 25% export surcharge on electricity to key U.S. states.

Asia Market Commentary

Japan’s annual wholesale inflation reached 4.0% in February, reflecting rising raw material costs and reinforcing expectations of further Bank of Japan (BOJ) interest rate hikes. The corporate goods price index (CGPI) increase aligned with forecasts but slowed from January’s 4.2%. With consumer inflation exceeding the BOJ’s 2% target for nearly three years, Governor Kazuo Ueda signalled a continued tightening stance, allowing markets to price in future rate increases. Meanwhile, GDP growth for Q4 2024 was revised down to 2.2% from 2.8%, as weaker consumption and concerns over U.S. trade policies weighed on the outlook.

Currency Market Commentary

South Africa’s rand strengthened on Tuesday against a weaker dollar, as investors awaited the delayed national budget and monitored recession fears in the U.S. The euro reached five-month highs on Wednesday following Ukraine’s willingness to accept a month-long ceasefire, while stock markets fluctuated amid conflicting U.S. tariff updates and concerns over an economic slowdown. The Russian rouble rose to a six-week high against the dollar, supported by reduced imports and hopes for a resolution to the Ukraine conflict, despite Kyiv’s large-scale drone attack on Moscow.

Commodity Market Commentary

Gold prices held firm ahead of key U.S. inflation data that could shape the Federal Reserve’s rate trajectory amid trade tensions and economic slowdown concerns. Oil prices edged higher on Wednesday, supported by a weaker dollar, though gains were limited by fears of a U.S. economic slowdown and tariff impacts on global growth. The U.S. Energy Information Administration raised its 2024 crude output forecast to 13.61 million barrels per day, while crude stockpiles rose by 4.2 million barrels last week. Investors are also closely watching OPEC+ plans, with the group set to increase production in April.

Absa Group Limited (ABG) -1.27%
Absa Group reported a solid financial performance for FY 2024, with total income increasing by 5% to R109.95 billion. Headline earnings per share rose 10% to 2,662.2 cents, and basic earnings per share grew 8% to 2,599.2 cents. Net asset value per share increased by 11%, reaching 19,311 cents. A 7% higher dividend of 1,460 cents per share was declared, and gross loans grew by 6.2% to R1.4 trillion. Deposits increased by 12.2%, and the Common Equity Tier 1 ratio stood at 12.6%.

Hyprop Investments Limited (HYP) -0.12%
Hyprop announced an interim dividend for the six months ending 31 December 2024 between 105 and 115 cents per share, marking a 100% increase compared to the prior period when no dividend was declared. The Group's interim results will be released on 13 March 2025.

HomeChoice International Plc (HIL) +7.14%
HomeChoice International reported strong results for FY 2024, with profit before tax increasing by 31.2%. Customer growth reached 3.1 million, revenue grew by 20.6% to R4.4 billion, and Weaver Fintech saw a 33.8% revenue surge. Earnings per share increased by 26.1% to 395.2 cents, and headline earnings per share rose by 27.3% to 393.9 cents. The Group declared a final dividend of 97.0 cents per share, up from 83.0 cents in 2023.

Attacq Limited (ATT) -0.31%
Attacq reported a 49.1% increase in distributable income per share (DIPS) and a 46.7% increase in the interim dividend. The interest cover ratio improved to 2.91 times, while group gearing rose slightly to 25.9%. Occupancy decreased to 91.9%, and development activity at Waterfall City remained robust at 43,988m² of GLA.

Clientèle Limited (CLI) -3.10%
Clientèle Limited reported a 37.3% increase in headline earnings to R227.7 million for H1 2024, driven by strong contributions from 1Life Insurance, Clientèle Life, Clientèle General, and CBC Rewards. Despite challenging economic conditions, the group maintained a strong solvency position and positive cashflows. The 1Life acquisition contributed R42.1 million to earnings, with a bargain purchase gain of R469 million.

Volkswagen AG (VOW3) -1.09%

Volkswagen anticipates a challenging year as it scales up EV production, implements cost reductions, and manages trade tensions. Earnings in China are expected to decline by up to €1 billion as the company refocuses on new model development, while a €1 billion cost-saving initiative in Germany aims to enhance efficiency. The 2025 operating profit margin is projected at 5.5%–6.5%, slightly above 2024’s 5.9%, as elevated production and battery investment costs continue to weigh on profitability. The company has trimmed its five-year investment plan to €165 billion and proposed a dividend of €6.36 per preference share, down from €9.06 in 2023. Operating profit fell 15% in 2024 to €19.1 billion on revenue of €324 billion, aligning with market expectations.

American Airlines Group Inc. (AAL) -8.32%

American Airlines has revised its first-quarter outlook, now expecting an adjusted loss per share of $0.60 to $0.80, significantly wider than its previous forecast of $0.20 to $0.40. The revision reflects concerns over tariff pressures and uncertainties surrounding government spending, which could weigh on travel demand.

Kohl’s Corporation (KSS) -24.07%

Kohl’s CEO warned that the company’s turnaround will take time, following a larger-than-expected decline in annual sales guidance, which sent shares down 20% to a near 30-year low. The retailer, facing weaker demand and inflationary pressures, expects 2025 comparable sales to drop 4%–6%, far exceeding market expectations of a 0.9% decline. Earnings per share are now projected between $0.10 and $0.60, well below the $1.23 forecast. The company is focusing on private-label brand rebuilding and promotional strategy adjustments to regain market share, though analysts remain sceptical about the effectiveness of these measures.

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