Local Market Update

The local stock market closed lower yesterday, as both the Top-40 index and the broader All-Share index fell by over 0.9% (now at 77,668 index points). South Africa's power crisis continued to weigh on the market, with Eskom, the state utility, warning of potential further scheduled outages. Investors are now awaiting the interest rate decision by the South African Reserve Bank (SARB) next week, with analysts predicting a rate hike. Additionally, Investec Property Fund reported a 2.8% decrease in full-year distributable income, attributed to rising global interest rates.

European Market Update

European markets experienced an uptick as progress in U.S. debt ceiling talks boosted investor sentiment. Germany's DAX index closed 1.37% higher, reaching its highest level since January 2022, driven by the climb of companies like Commerzbank and Volkswagen. Conversely, British telecoms giant BT dropped 5% after announcing plans to reduce its workforce between 2028 and 2030. British luxury retailer Burberry saw a 5% decline despite surpassing sales estimates, as weaker demand among younger shoppers was reported.

US Market Update

The S&P 500 and Nasdaq Composite reached their highest closing levels since August 2022, driven by ongoing focus on debt ceiling negotiations. House Speaker Kevin McCarthy expressed optimism regarding a potential deal by next week's House vote. Walmart, the retail giant, contributed to the market's growth, with a 1.3% increase following a strong financial report that exceeded Wall Street forecasts for earnings per share and revenue in the first quarter. The company also raised its full-year performance expectations.

Asia Market Update

Most Asia-Pacific markets rose as the G-7 meeting commenced. Chinese tech giant Alibaba experienced a nearly 5% decline in Hong Kong after reporting quarterly revenue that fell short of expectations. Alibaba's revenue for the March quarter amounted to 208.20 billion yuan ($30.12 billion), slightly below the Refinitiv consensus estimate. Meanwhile, New Zealand's trade surplus for April narrowed compared to the previous year, standing at 427 million New Zealand dollars ($266.46 million) compared to NZ$470 million.

Commodity Market Update

Gold prices faced their largest weekly drop in 3.5 months due to robust U.S. economic data and optimism surrounding a resolution in the debt ceiling debate, which diminished the appeal of bullion. Oil prices slightly declined as the optimism surrounding the potential avoidance of a U.S. debt default counterbalanced concerns about sticky inflation data that could lead to further interest rate hikes by global central banks. U.S. President Joe Biden and Speaker of the House Kevin McCarthy reiterated their commitment to reaching a debt ceiling deal soon.

Currency Market Update

The South African rand extended its losses against the U.S. dollar as the dollar remained close to a seven-week high. The rand concluded the day at around R19.37 to the dollar, representing a 0.89% depreciation. The dollar also strengthened against the yen, nearing a six-month peak due to rising U.S. Treasury yields and increased expectations of higher interest rates, driven by optimism in Washington's debt ceiling negotiations.

GRINDROD SHIPPING HOLDINGS LIMITED (GSH) -0.1%

In the reported period, the company generated revenues of $76.8 million, while maintaining a gross profit of $7.0 million. However, the company experienced a loss for the period, resulting in a deficit of $4.3 million, equivalent to $0.22 per ordinary share, which was attributable to its owners. The adjusted net loss for the same period was also $4.3 million, or $0.22 per ordinary share. On a positive note, the company achieved an adjusted EBITDA of $15.7 million. Additionally, the daily time charter equivalent (TCE) rates for Handysize and supramax/ultramax vessels were $9,491 and $12,869, respectively, per day.

INVESTEC PLC (INP) 3.5%

In the fiscal year, the company experienced positive results across various metrics. Adjusted earnings per share showed a significant increase of 25.0%, reaching 68.9p, which exceeded the previous guidance's upper end. However, funds under management (FUM) decreased by 4.5% to £61.0 billion, mainly due to unfavourable market movements. Net inflows were £377 million, with discretionary FUM seeing inflows of £810 million partly offset by net outflows of £433 million in non-discretionary FUM. Net core loans increased to £30.2 billion, a 7.7% growth in neutral currency, driven by corporate lending and residential mortgage lending in core geographies. Customer accounts (deposits) grew by 5.8% in constant currency, but reported a decrease of 1.4% to £39.6 billion. Revenue increased by 14.6%, benefiting from higher global interest rates, loan growth, client acquisition, and increased client activity. However, fee and commission income were negatively affected by unfavourable market movements and a weakening macro backdrop. The company made improvements in its cost-to-income ratio, which improved to 59.6% as operating costs grew by 9.5%. Pre-provision adjusted operating profit increased by 28.0% to £917.0 million, supported by diverse revenue streams. Asset quality remained strong, with expected credit loss (ECL) impairment charges increasing to £81.1 million, resulting in a credit loss ratio (CLR) of 23bps, approaching the lower end of the Group's through-the-cycle (TTC) range. Return on equity (ROE) and return on tangible equity (ROTE) showed positive growth, with ROE at 13.7% and ROTE at 14.7%. Tangible net asset value (TNAV) per share remained largely flat at 474.3p, while net asset value (NAV) per share was 510.0p. The company continued to execute its strategic priorities, implementing capital optimization strategies and announcing a combination with Rathbones plc post-year-end. Maintaining strong capital and liquidity positions, the company was able to navigate the volatile and uncertain environment and support growth initiatives. The Board proposed a final dividend of 17.5p per share, resulting in a full-year dividend of 31.0p, within the Group's pay-out range of 30% to 50%.

ALIBABA (BABA) -5.4%

Alibaba recently announced its plans to separate and make its cloud division a standalone publicly traded company, coinciding with the company's quarterly revenue falling short of expectations. CEO Daniel Zhang stated that the company is actively working towards unlocking the value of its businesses and has received board approval for a complete spin-off of the Cloud Intelligence Group. The spin-off will be executed through a stock dividend distribution to shareholders, intending to establish an independent publicly listed company. Quarterly revenue reached 208.2 billion Chinese yuan ($29.6 billion), slightly missing expectations of 210.2 billion yuan, with a year-on-year growth of 2%. The reported non-GAAP diluted earnings per share stood at 1.34 yuan, compared to an expected 2.08 yuan, demonstrating a year-on-year increase of 35%. The year began sluggishly, as indicated by executives of major e-commerce platforms, with overall sales of online physical goods remaining weak. However, recent economic data revealed an 18.4% rise in retail sales in China for April, and China's economy achieved a 4.5% growth in the first quarter, its fastest pace in a year. These positive developments were anticipated to contribute to Alibaba's sales growth.

NETFLIX (NFLX) 9.2%

Following the release of details about its new ad-supported tier, Netflix experienced a significant stock increase of over 9% on Thursday, indicating the positive impact of its evolving business model. The streaming giant revealed that its cheaper, ad-supported option had attracted five million monthly active users, with 25% of new subscribers opting for this tier in available regions. While Netflix's recent financial results were mixed, the company managed to add 1.75 million subscribers. To further boost revenue, Netflix is also preparing to implement a crackdown on password-sharing, aiming for a broader rollout. The introduction of the $6.99 per month ad-supported tier, featuring 15 to 30-second commercials before and during content, represents a notable shift in Netflix's management strategy, as they had previously stated their reluctance to include ads on the platform. Microsoft partnered with Netflix to launch this ad option, and Nielsen will evaluate its content later this year to provide advertisers with better insights into its reach. Netflix founder and former CEO Reed Hastings acknowledged that he had been hesitant about incorporating advertising on the platform. When introduced in November, Netflix's ad tier was priced $1 lower than the ad-supported options offered by Disney+ and Hulu.

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