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Local Market Update

In the Johannesburg Stock Exchange, the Top-40 blue-chip index closed the day 0.74% higher, while the broader All-Share index ended 0.54% up at 78,390 points. However, retail sales in South Africa showed a year-on-year drop of 1.6% in March, exceeding analysts' predicted decline of 0.7%. Sentiment was further dampened by reports of a delay in maintenance at the country's only nuclear power station, raising concerns about the ongoing power crisis. One of the Koeberg plant's reactors, already offline for maintenance, is now expected to remain shut for an additional 200 days. Additionally, Telkom SA, the state-controlled telecommunications company, saw a significant decline of up to 30% in Johannesburg trading after announcing a potential write-down of its assets' value by about R13 billion.

European Market Update

European markets experienced mixed results as investors closely monitored U.S. debt ceiling negotiations. Food and beverage stocks registered the largest losses, dropping by 1.3%, followed by utilities, which declined by 1.1%. On the positive side, travel stocks gained 0.9%, and industrials rose by 0.6%. Traders also analyzed the latest earnings reports, with companies such as Commerzbank, Siemens, and JD Sports adjusting their outlooks for the upcoming year. Despite announcing a projected underlying profit of over £1 billion ($1.246 billion) for the first time this year and reporting a 12% increase in full-year sales, shares of JD Sports fell by 6.2% during early afternoon trade, contributing to a 0.4% decline in European retail stocks.

US Market Update

U.S. stocks advanced as investors remained hopeful for a deal on the U.S. debt ceiling to prevent a potential default. Treasury Secretary Janet Yellen emphasized the immediate need to raise the limit, with a possible default as early as June 1. Regional bank shares rebounded, boosting market sentiment, as Western Alliance Bancorp reported improving deposit growth. Conversely, WeWork's shares declined by over 17% following the announcement that chairman and CEO Sandeep Mathrani would step down at the end of the month.

Asia Market Update

Asia-Pacific markets saw gains on optimism surrounding negotiations between U.S. President Joe Biden and congressional leaders to raise the debt ceiling and avoid a default. However, shares of Chinese tech giant Tencent slid despite reporting an 11% quarterly revenue increase to 150 billion Chinese yuan ($21.4 billion). The company experienced a significant rebound in payment volumes, ad sales, and gaming. Nevertheless, net profit reached 25.8 billion yuan, falling short of the 31 billion yuan expected by economists. Meanwhile, Japan's trade deficit narrowed by nearly half in April, dropping from 854.93 billion yen to 432.41 billion yen compared to the previous year.

Commodity Market Update

Gold prices remained unchanged in early Asian trade due to the focus on U.S. debt limit negotiations, while a stronger dollar limited gains following reduced expectations of a rate cut by the Federal Reserve this year. Oil prices declined as traders monitored progress on talks to raise the U.S. debt ceiling. The previous session saw a surge of nearly 3% in oil prices due to optimism surrounding U.S. fuel demand and a sharp decline in U.S. gasoline inventories, which reached the highest levels since 2021.

Currency Market Update

The South African rand weakened following disappointing March retail sales data and a stronger U.S. dollar, reaching around R19.20 to the dollar and experiencing a 0.51% depreciation. The U.S. dollar remained near a seven-week high as President Joe Biden and top U.S. congressional Republican Kevin McCarthy worked to avoid a damaging debt default. Meanwhile, the Australian dollar slipped after the release of disappointing jobs data.




Telkom is currently finalizing its financial results for the period ending on March 31, 2023. However, it anticipates a decrease in basic earnings per share (BEPS) and headline earnings per share (HEPS) for the current period. This decline can be attributed to various factors, including marginal revenue growth resulting from the transition from legacy to new generation technologies, upfront investment in working capital for handsets and equipment, costs associated with the impact of frequent power outages, and inflationary cost pressures. Additionally, the restructuring process, as announced on February 14, 2023, and the estimated impairment charge of R13 billion significantly impacted both basic and headline earnings. The audited results for the year ending March 31, 2023, compared to the previous year, indicate a significant decline in earnings. The reported basic earnings per share (BEPS) for the current period were 536.6 cents, with an expected decrease of 465%-485%. This translates to a projected movement of 2,495.2 to 2,602.5 cents lower than the previous year's earnings, resulting in an expected range of (1,958.6) to (2,065.9) cents per share. Similarly, the normalized BEPS are anticipated to be 70%-90% lower, with an expected earnings range of 375.6 to 482.9 cents per share. The reported headline earnings per share (HEPS) of 575.5 cents are projected to decrease by 85%-105%, resulting in an expected range of 489.0 to 604.1 cents per share lower. The normalized HEPS are expected to be 60%-80% lower, with an earnings range of 345.2 to 460.2 cents per share. These results indicate a significant decline in earnings compared to the previous year, reflecting various factors impacting Telkom's financial performance.


During the full year of 2023 compared to 2022, there were notable changes in our financial performance. Assets under management (AUM) declined by 10% to £129.3 billion, while net flows experienced an outflow of £10.6 billion, contrasting with the previous year's inflow of £5.0 billion. Average AUM also decreased by 3% to £134.9 billion. Our profit before tax saw a decrease of 20% to £212.6 million, and adjusted operating profit declined by 10% to £206.9 million, resulting in an adjusted operating profit margin of 32.7%. Earnings per share were also impacted, with basic earnings per share declining by 19% to 18.2p, and basic headline earnings per share decreasing by 15% to 18.2p. Adjusted earnings per share were down by 10% to 17.3p. Furthermore, the dividend per share decreased by 10% to 13.2p. These changes reflect the evolving financial landscape and the challenges faced during the year.



TENCENT (700) -0.9%

Tencent, one of China's leading technology companies, announced impressive financial results with a quarterly revenue increase of 11%, marking its strongest growth in over a year. The company experienced a significant rebound in payment volumes, ad sales, and gaming, contributing to this positive performance. Tencent attributed the faster growth in net profit to a favourable revenue mix shift, operational efficiencies, and a favourable comparison to the previous year. The reported revenue reached 150 billion Chinese yuan ($21.4 billion), surpassing expectations, while the profit attributable to equity holders stood at 25.8 billion yuan, slightly below expectations but still reflecting a 10% year-on-year increase. It is worth noting that the Chinese tech industry as a whole has faced heightened regulatory scrutiny from Beijing since late 2020, leading to significant challenges for the country's major companies and wiping off more than $1 trillion in market value.

UBS (UBSG) +1.1%

UBS, the Swiss banking giant, anticipates a financial impact of approximately $17 billion resulting from its emergency takeover of Credit Suisse. The rushed deal is believed to have influenced UBS's due diligence process, as stated in a recent regulatory filing submitted to the US Securities and Exchange Commission (SEC). The filing disclosed an estimated negative impact of around $13 billion due to fair value adjustments of assets and liabilities of the newly combined entity. Additionally, UBS expects potential litigation and regulatory costs to amount to $4 billion. However, the bank foresees a counterbalancing factor with a one-time gain of $34.8 billion from "negative goodwill," which reflects the acquisition of assets at a significantly lower cost than their actual value. The emergency acquisition of Credit Suisse, brokered by Swiss authorities in March, transpired over a weekend when the domestic rival faced potential collapse due to substantial customer deposit withdrawals and a steep decline in its share price. The acquisition was executed for 3 billion Swiss francs ($3.4 billion).

TARGET (TGT) +2.6%

Target has stated that organized retail crime is expected to result in an additional $500 million in stolen and lost merchandise compared to the previous year. Based on calculations from the company's financial filings, Target's inventory loss, known as shrink, amounted to approximately $763 million in the last fiscal year. With the projected increase, shrink for this year is anticipated to exceed $1 billion. CEO Brian Cornell addressed this challenge during Target's fiscal first-quarter earnings call, highlighting the rising theft rates alongside slower sales and more price-sensitive shoppers. He described retail theft as a "worsening trend" that emerged last year and noted an increase in violent incidents within Target's stores. However, it is challenging to verify the extent of growth in organized retail theft and its precise magnitude. According to the National Retail Federation, shrink cost retailers $94.5 billion in 2021, up from $90.8 billion in 2020, but since the data is anonymized and shared by retailers, it cannot be independently fact-checked.

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Research Team
Media, Sasfin Wealth