Taking Stock - South Africa’s glass packaging industry.

In todays taking stock, we discuss how South Africa’s glass packaging industry could lose a further R1.5 billion in sales if the latest ban on alcohol sales continues for long.

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MARKET COMMENTARY

SOUTH AFRICAN

Local stocks closed higher yesterday, as industrials led the market higher. At the close of trade, the All Share closed 0.26% firmer while the Top 40 index was up 0.17%. Investors are looking for signs of the progress South Africa has made in securing COVID-19 vaccines. All eyes will be on the latest interest rate decision on Thursday, in which most economists expect it to hold the repo rate at 3.5%, but a small minority are predicting a rate cut. Government bonds were little changed early yesterday, with the yield on the 2030 instrument down 0.1 basis point to 8.84%.

 

 

EUROPE

European stocks started the new trading week slightly higher on Monday. The pan-European Stoxx 600 closed up by 0.2% provisionally, with autos gaining 1.3% as most sectors and major bourses climbed. Britain’s FTSE 100 index bucked the positive trend in Europe, falling 0.2%. The UK continues to lead the pace when it comes to the rollout of vaccinations; on Monday, it is broadened out its program to offer a first dose of the vaccine to anyone aged 70 and over, and those who are considered clinically extremely vulnerable. European investors also looked to Germany on Monday following the election on Saturday of Armin Laschet as the new chairman of the ruling CDU party.

 

 

US

The US stock market was closed on Monday in honour of Martin Luther King Jr. Day.

 

 

ASIA

Stocks in Asia traded mixed this morning as investors await remarks from US President-elect Joe Biden’s nominee for Treasury secretary, Janet Yellen. Hong Kong’s Hang Seng index was among the region’s biggest gainers as it jumped 2.27%, with shares of Hong Kong Exchanges and Clearing soaring more than 6%. Hong Kong leader Carrie Lam announced an extension of social distancing measures in the city after coronavirus infections returned to triple digits, according to Reuters.

 

 

CURRENCIES

The rand started the week on a softer note, as the dollar clung to gains on global markets. Eventually, the rand closed out the day at R15.18 versus the dollar, up roughly 0.49% on its previous close. The dollar was supported by weak US economic data and rising coronavirus cases that made investors cautious about the pace of global economic recovery from the pandemic. The rand has mainly taken its cue from global drivers so far this month, as there have been few major local data releases.

 

 

COMMODITIES

Brent crude futures edged up this morning as optimism that government stimulus will buoy global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally could cool fuel consumption. Gold prices inched higher today after hitting a 2-month low in the previous session, as hopes of further global stimulus to stem the economic toll from the COVID-19 pandemic countered a firmer dollar. US President-elect Joe Biden's nominee to run the Treasury Department, Janet Yellen, will tell the Senate Finance Committee today that the government must "act big" with its next coronavirus relief package.            

LOCAL COMPANIES

Mediclinic (MEI) -0.7%

JSE-listed hospital group Mediclinic is now reaching up to 90% occupancy levels within its roughly 1 000 intensive care unit (ICU) or high care beds across South Africa, with several of its hospital ICUs at capacity due to the second wave of Covid-19. In an update on Friday, the group’s chief clinical officer for Southern Africa Dr Gerrit de Villiers warned that the surge is putting its staffing, emergency centre capacity and critical care resources under significant strain. “Currently with the second surge of Covid-19 we are seeing occupancies of up to 90% with significant volumes of patients in emergency centres,” he noted. “Our current ventilator capacity is under extreme pressure,” he said, adding: “We have noted an increase in demand in the last week.” Mediclinic has about 850 ventilators within its hospital network in SA.

 

Consol

South Africa’s glass packaging industry could lose a further R1.5 billion ($98 million) in sales if the latest ban on alcohol sales continues for long, the CEO of glass bottle maker Consol said on Monday. South Africa has recently banned alcohol sales for the third time as part of efforts to free up space for Covid-19 patients in hospitals burdened with alcohol-related injuries. The first two bans together resulted in losses of more than R1.5 billion to the glass packaging industry, Consol Chief Executive Officer Mike Arnold said in an emailed response to questions. Arnold also warned of likely job losses at Consol and most parts of its supply chain, adding any major extended loss of demand, at short notice, was “catastrophic.” The company, which supplies wine, spirits and beer bottles, is spending R8 million a day to keep production and furnaces running even as orders run dry, Arnold said, adding its debt was also piling up. Consol is not yet suspending or cancelling investments, as this will depend on the duration of the ban. It has, however, reallocated R800 million meant to rebuild and maintain its current furnace capacity and footprint at home towards maintaining operations during the lockdown.

 

INTERNATIONAL COMPANIES

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Media, Sasfin Wealth

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