Alibaba's Q2 Sales Miss Expectations Amid Economic Uncertainty in China, but Cloud and International E-Commerce Show Growth

LOCAL MARKET COMMENTARY

On the Johannesburg Stock Exchange, the blue-chip Top 40 index remained flat on Friday, slipping just 0.02% to close at 75,773 points, while the All Share index edged up by 0.05% to 83,872 points. Meanwhile, Barloworld Ltd., valued at approximately R16 billion, is in talks with a consortium that includes Saudi Arabia’s Zahid Group for the sale of its African Caterpillar equipment distribution business. S&P Global also revised South Africa's outlook to "positive" from "stable," citing the government's economic reforms and increased private investment, following the formation of a coalition government after the ANC's loss of its parliamentary majority.

EUROPEAN MARKET COMMENTARY

European markets ended lower on Friday after a volatile trading session, as investors analysed new economic data, including the latest U.K. GDP figures. The U.K. economy grew by just 0.1% in the three months to September, falling short of the 0.2% growth forecast and down from a 0.5% expansion in the previous quarter. U.K. Finance Minister Rachel Reeves expressed dissatisfaction with the weaker-than-expected growth.

US MARKET COMMENTARY

Wall Street's major indexes fell on Friday, with the S&P 500 and Nasdaq seeing their largest losses in two weeks. Investors were concerned about a slower pace of interest-rate cuts following comments from Federal Reserve Chair Jerome Powell, who noted strong economic growth, a robust job market, and inflation above the 2% target as reasons for a cautious approach. This sentiment was reinforced by better-than-expected U.S. retail sales data for October and rising import prices, indicating persistent inflation pressures. Additionally, markets reacted to U.S. President-elect Donald Trump's cabinet appointments.

ASIA MARKET COMMENTARY

Asia-Pacific stocks mostly rose this morning, starting off a relatively quiet week for economic data. Key upcoming releases include China's loan prime rate on Wednesday, with no changes expected; the one-year rate remains at 3.1% and the five-year rate at 3.6%. Japan is set to release trade data on Tuesday and inflation figures on Friday, while the Reserve Bank of Australia will publish minutes from its recent meeting. Meanwhile, Bank of Japan Governor Kazuo Ueda reiterated that the central bank could continue raising interest rates if economic conditions align with forecasts, but he did not specify if a rate hike could happen in December.

CURRENCY MARKET COMMENTARY

The South African rand weakened early on Friday, continuing its decline from the week after Donald Trump's U.S. election victory, as investors awaited S&P Global's review of the country's credit rating. Meanwhile, the dollar gained against the yen this morning following remarks from Japan's central bank governor, who indicated potential future policy tightening but did not specify when it might occur, leaving markets uncertain about the timing of a possible rate hike.

COMMODITY MARKET COMMENTARY

Gold prices increased this morning, recovering from last week's steep losses as the rally in the U.S. dollar paused. Investors are now awaiting insights from Federal Reserve officials this week for guidance on future interest rate decisions. Meanwhile, oil prices inched higher following an escalation in the Russia-Ukraine conflict over the weekend. However, concerns about weak fuel demand in China and predictions of a global oil surplus limited gains in the oil market.

Barloworld Limited (BAW) +6.05%

For the period ending September 30, 2024, the group's Basic Earnings Per Share (EPS) is expected to range from 1010.4 to 1030.4 ZAR cents, showing a decrease of 13.9% to 15.6% compared to 1197.0 ZAR cents in 2023. EPS from continuing operations is forecasted to decline by 3.4% to 5.3%, while EPS from discontinued operations is expected to be zero, a full 100% drop from 129.8 ZAR cents in the prior year. The group's Basic Headline Earnings Per Share (HEPS) is predicted to be between 1012.1 and 1032.1 ZAR cents, marking a 20.1% to 21.6% decrease from 1291.4 ZAR cents in 2023. HEPS from continuing operations is expected to decline by 10.7% to 12.5%, with discontinued operations also dropping to zero from 135.1 ZAR cents last year.

Trematon Capital Investments Limited (TMT) 0.00%

The Trematon group expects a basic loss per share of 4.3 to 4.7 cents for the year ending August 31, 2024, compared to earnings of 31.7 cents in the previous year. Headline earnings per share are forecasted to be between zero and a loss of 0.2 cents, down from 3.6 cents last year. The net asset value (NAV) per share is expected to decrease by 11% to 13%, ranging between 320 and 325 cents, compared to 366 cents in the previous year. Similarly, the intrinsic net asset value (INAV) per share is projected to decline by 18% to 20%, ranging between 352 and 358 cents, down from 439 cents last year.

Alibaba Group Holding Limited (9988) -0.85%

Alibaba Group's second-quarter sales fell short of analysts' expectations, impacted by economic uncertainty that weakened consumer spending in China, affecting its core domestic business. The company posted an adjusted profit of 15.06 yuan per American Depository Share, slightly above the forecast of 14.88 yuan. However, its revenue came in at 236.50 billion yuan ($32.72 billion), missing the estimated 240.17 billion yuan. Despite this, Alibaba's Cloud Intelligence division saw a 7% revenue increase, with strong growth in public cloud and AI-related products. Additionally, international e-commerce revenue surged 29% to 31.67 billion yuan, driven by rising global demand for affordable Chinese products.

Sovcomflot (FLOT) 0.00

Russia's largest tanker company, Sovcomflot, reported a decline in financial performance on Friday, citing the impact of Western sanctions on its operations. The U.S. imposed sanctions on Sovcomflot in February as part of measures to curb Russia's oil revenues, which could fund its war efforts in Ukraine. As a result, Sovcomflot's revenue for the first nine months of the year fell by 22.2% year-on-year to $1.22 billion, while its core earnings (EBITDA) dropped 31.5% to $861 million.

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