Taking Stock - South Africa’s annual investment conference.

In todays taking stock, we take a look at how South Africa’s annual investment conference attracted roughly R110 billion ($7.1 billion) in new investment pledges.

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MARKET COMMENTARY

SOUTH AFRICA

The local stock market traded higher yesterday, as the JSE All Share index added 0.47%, while the JSE Top 40 index strengthened 0.44%. South Africa’s annual investment conference attracted roughly R110 billion ($7.1 billion) in new investment pledges by companies and financial institutions, a boost for the government as it tries to chart a recovery from the COVID-19 pandemic. Meanwhile, Santam said on Wednesday it was considering a court ruling that found it should pay a coronavirus-related claim it had rejected, which sent it shares down over 4%. Like peers around the world, Santam has been fighting with some clients after it resisted paying claims related to the impact of coronavirus lockdowns on their businesses.

 

 

EUROPE

European stocks closed higher on Wednesday as investors weigh up positive coronavirus vaccine announcements and the ongoing spread of the virus. The pan-European Stoxx 600 closed up by over 0.4%, with autos stocks adding 1.3% to lead gains as most sectors and major bourses inched into positive territory following a muted morning’s trade. German stock exchange operator Deutsche Boerse on Wednesday announced a $1.8 billion deal for an 80% stake in Institutional Shareholder Services (ISS). Maersk, the world’s largest container shipping firm, matched third-quarter profit expectations on Wednesday amid a stronger-than-expected pickup in demand.

 

 

US

US stocks fell for a second straight day on Wednesday as the market’s recent rally to new records took a pause. Stocks turned sharply lower after Mayor Bill de Blasio announced New York City’s public schools will move to remote learning only as the city tries to tamp down a growing number of coronavirus cases. The US is grappling with rising COVID-19 infections ahead of a likely tough winter. The country is recording roughly 157,000 new coronavirus cases per day, on average. Some stay-at-home stocks jumped after the announcement of the shuttering of the nation’s largest school system. Video conferencing company Zoom Video rallied more than 3%, while Peloton gained nearly 2%.

 

 

ASIA

Asian markets fell this morning as traders grappled with optimism around a potential coronavirus vaccine and economic worries. In Australia, the benchmark ASX 200 retraced some of its earlier losses but still traded down 0.16%. The so-called Big Four banks traded higher, with Westpac up by 1.75%. Major miners were mixed, with BHP down by 1.06%. Jobs in the country surged, beating expectations in October after the state of Victoria eased coronavirus restrictions. The session in Asia follows US stocks falling for a second straight day, pausing a recent rally to new records.

 

 

CURRENCIES

The dollar nursed losses after five sessions of decline and the yen held on to most of its recent gains on Thursday, as investors worried about rising coronavirus deaths and began to wager on more monetary stimulus from the US Federal Reserve. The rand eased early on Wednesday, as cheer over COVID-19 vaccine developments faded and investors looked ahead to a rates decision by the local central bank later today. Yesterday saw the rand close at R15.46 to the dollar, 0.4% weaker.

 

 

COMMODITIES

Gold fell this morning as the dollar gained some ground and progress in COVID-19 vaccine development dented the precious metal's appeal. Pfizer announced on Wednesday that the final results from the late-stage trial of its COVID-19 vaccine showed it was 95% effective. Brent crude fell in early trade today, giving up some of gains from the previous day as surging COVID-19 cases and widening lockdowns raised fears over fuel demand, offsetting further upbeat vaccine news.  OPEC+ is due to discuss policy at a full ministerial meeting to be held on November 30th and December 1st.

LOCAL COMPANIES

Investec Property Fund (IPF) +1.7%

The property landlord announced a 33.9% drop in distributable earnings to 46.87 cents from 70.93 cents previously, primarily due to the impact of the global COVID-19 pandemic and subsequent effect on tenants, especially in South Africa. Joint-CEO Darryl Mayers: “The leasing activity achieved across South Africa and Europe during one of the most challenging operating environments ever encountered, further substantiates the strength of the Fund’s underlying real estate”. Despite the tough trading conditions, the group declared a dividend of 39.05 cents, demonstrating the strength and resilience of its balance sheet. The landlord’s revenue decreased by 16% to R738 million from R874 million, with operating profit dropping 29% to R455 million.

 

Spar Group (SPP) +13.3%

The retailing group reported a 13.5% increase in overall turnover to R124.3Bn for full-year end-September, while headline earnings only rose 0.5% to R2.18Bn amid a change in its sales mix, with liquor outlets unable to trade during a third of the year due to government restrictions. “Consumers supported our local, convenient, and trusted retailers during this time of crisis”, the group said adding consumers avoided large malls to maximise safety due to the virus. The retailer is facing a weak local economy with constrained consumer spending, while its European operations faces headwinds from a second wave of infections, but the group said it had learnt lessons from the first wave at the start of 2020. The retailer rewarded shareholders with an 8.1% higher final dividend of 865 cents.

INTERNATIONAL COMPANIES

Lowe’s (LOW) -8.2%

The home improvement or DIY enthusiast retailer’s third quarter earnings and outlook fell short of expectations, a day after peer Home Depot reported strong results. The group’s bottom line was weighed down by higher labour costs and investments in its e-commerce business. The group’s same-store sales surged 30%, including a 100% jump in online sales, as customers opted to avoid physical stores. The retailer posted lower net income of $692 million, or 91 cents a share, from $1.05Bn, or $1.36 per share previously, adjusted EPS came in at $1.98 slightly below the $1.99 expected. Group revenues rose 28.2% to $22.3Bn, topping analysts' estimates of a $21.25Bn. CEO Marvin Ellison: "Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions and triple-digit growth online”.

 

Target (TGT) +2.3%

The big-box retailer reported Q3 earnings on Wednesday before the bell on Wall Street that easily exceeded analysts’ expectations, as the group won around $6Bb in market share by focusing on shoppers’ habits. The discount retailer’s curb side pickup service grew more than 500% and its home delivery service Shipt surged nearly 280%. "In preparation for the holiday season, we focused first on the safety of our guests and our team, making changes to eliminate crowds while enhancing our fast-growing, contactless options like in-store pickup, Drive Up and Shipt” the group said. The group generated $22.63Bn in revenue, well ahead of the $20.93 estimate, as same-store sales jumped 20.7% compared to the 11.2% expected. The retailer’s net income increased to $1.01 billion, or $2.01 per share, from $714 million or $1.39 per share in the previous year.

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