TSMC Poised for Profit Surge Amid Rising AI Demand

LOCAL MARKET COMMENTARY

South Africa's Top 40 index and All Share index rose by 0.62% and 0.52%, respectively, on Wednesday, closing at 78,304 and 86,393 points. This followed a 3.2% year-on-year increase in retail sales for August, up from a revised 1.7% in July, reflecting improved consumer sentiment. Retail sales are crucial for the country's economy, which relies heavily on consumption for growth. Meanwhile, consequences from the VBS Bank looting scandal are unfolding, with the Financial Sector Conduct Authority fining Ralliom Razwinane R3 million and banning him from the financial services industry for a decade.

EUROPEAN MARKET COMMENTARY

Europe's STOXX 600 closed lower on Wednesday, as tech and luxury stocks were weighed down by disappointing earnings from major players ASML and LVMH. Investors were also cautious ahead of the European Central Bank's policy decision, with expectations of a potential 25 basis point rate cut later today, which could provide a boost to stocks.

US MARKET COMMENTARY

The Dow Jones Industrial Average hit a record high on Wednesday, while Wall Street's other major indexes also rose, despite declines in large tech stocks. Gains in small-cap and financial shares, driven by strong earnings, helped support the market. Though tech stocks have fuelled much of Wall Street’s success this year, stretched valuations and an improving economic outlook are prompting investors to explore other sectors. Focus now shifts to upcoming corporate earnings reports and key economic data, including September’s retail sales and industrial production figures, due today.

ASIA MARKET COMMENTARY

China's property stocks declined following a briefing by its housing ministry, though the broader CSI 300 index rose along with most other Asia-Pacific markets this morning. In Japan, exports fell by 1.7% in September, marking the first decline this year and surprising economists who had predicted 0.5% growth. Imports also grew less than expected, rising 2.1% compared to the anticipated 3.2%. Meanwhile, Australia's unemployment rate dropped to 4.1% in September, slightly lower than forecasted, and labour participation rose to 67.2%, exceeding expectations.

COMMODITY MARKET COMMENTARY

Gold prices rose this morning, staying just below record highs as uncertainty around the U.S. elections and anticipated central bank rate cuts supported demand. Investors are also awaiting key U.S. data for further market direction. Meanwhile, oil prices increased in early Asian trading, recovering some of the sharp losses from recent days, following industry data revealing an unexpected drop in U.S. crude stockpiles last week.

CURRENCY MARKET COMMENTARY

On Wednesday, South Africa's rand maintained its gains due to a rise in domestic retail sales in August, suggesting improved consumer confidence. The U.S. dollar held close to its highest level in over two months this morning as prediction markets showed Republican candidate Trump leading in the presidential race.

Quilter PLC (QLT) +3.90%

Quilter reported strong third-quarter performance with net inflows of £1.4 billion, significantly higher than the previous quarters. The company’s assets under management and administration (AuMA) grew to £116.2 billion, up 2% from the previous quarter due to both inflows and favourable market conditions. Notably, the platform saw record net inflows of £1.5 billion. In the High Net Worth segment, net inflows reached £284 million, reversing the outflows seen in the previous year. The Affluent segment also performed well, with net inflows of £1.3 billion, driven by a 50% increase in gross inflows and lower outflows. Persistency improved across both segments, and adviser productivity remained stable.

4Sight Holdings Limited (4SI) +8.11%

The company expects its earnings per share (EPS) for the six months ending August 31, 2024, to be between 5.016 and 5.352 cents, marking an increase of 31.0% to 39.8% compared to the EPS of 3.828 cents for the previous six months ending June 30, 2023. Similarly, the headline earnings per share (HEPS) is expected to be between 5.016 and 5.354 cents, showing a growth of 31.0% to 39.9% over the previous period's HEPS of 3.828 cents.

 Morgan Stanley (MS) +6.50%

Morgan Stanley exceeded analysts' expectations for the third quarter, reporting earnings of $1.88 per share and revenue of $15.38 billion, both above estimates. The bank's profit increased by 32% to $3.2 billion, while revenue rose by 16%, leading its shares to jump 7.5% in early trading. The wealth management division saw a 14% revenue boost to $7.27 billion, beating estimates by $400 million. Equity trading revenue rose 21% to $3.05 billion, and fixed income revenue increased 3% to $2 billion, both above forecasts. Investment banking revenue surged 56% to $1.46 billion, and investment management also exceeded expectations with a 9% revenue increase to $1.46 billion.

Taiwan Semiconductor Manufacturing Company Limited (2330) -2.34%

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading advanced chip producer for AI applications, is expected to report a 42% surge in third-quarter profit, reaching T$300.1 billion ($9.33 billion), driven by strong AI demand from clients like Apple and Nvidia. This projected profit marks a significant rise from T$211 billion in the same quarter last year. While TSMC’s shares fell 2.3% on Wednesday, they remain close to record highs. During its earnings call later today, TSMC will provide fourth-quarter guidance and update its full-year outlook, including capital expenditure, as it expands production with new facilities overseas, including a $65 billion investment in three U.S. plants in Arizona.

Do you prefer a full in-depth report you can read offline? Click here to download the full report.