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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks on the JSE traded lower yesterday, following the global trend as investors remain worried about a possible recession. The JSE All Share index closed out the day 1.55% down at 65,712, while the Top 40 index dropped 1.59%. Resources weighed most on the local market as the local J210 index shed 3.75%. Financials and industrials also traded lower, closing down 0.64% and 0.51% respectively. In other news, Health minister Joe Phaahla is due to join the minister in the Presidency, Mondli Gungubele, for a press briefing today, about cabinet deliberations after the health department advised that Covid-19 restrictions should be dropped.

EUROPEAN MARKET COMMENTARY

European stocks closed lower on Wednesday, reversing gains made in the previous sessions as global volatility continues. The pan-European Stoxx 600 ended down around 0.7%, with basic resources sliding 5% to lead losses as most sectors and major bourses ended in negative territory. On the data front in Europe, U.K. inflation hit a new 40-year high of 9.1% year-on-year in May as soaring food and energy prices continue to deepen the country’s cost-of-living crisis. In terms of individual share price movement in Europe, Voestalpine shares fell nearly 13% after JPMorgan cut the Austrian steel and technology company’s stock from “overweight” to “underweight.”

US MARKET COMMENTARY

US stocks fell slightly Wednesday in choppy trading as markets struggled to sustain a rebound from earlier in the day. Growing concerns of a recession on Wall Street have recently weighed on stocks. Fed Chair Powell on Wednesday told Congress the central bank has the “resolve” to tame inflation that has surged to 40-year highs. Expectations of a pending recession continued to grow on Wall Street this week. Citigroup raised chances of a global recession to 50%, pointing to data that consumers are starting to pull back on spending.

ASIAN MARKET COMMENTARY

Shares in the Asia-Pacific were mostly higher this morning as investors continued to monitor recession concerns. Hong Kong’s Hang Seng index rose 0.63%, and the Hang Seng Tech index gained around 1%. In economic data, Singapore is set to release its inflation numbers today. Meanwhile, the death toll from an earthquake in Afghanistan on Wednesday hit 1,000, disaster management officials said, with more than 600 injured and the toll expected to grow as information trickles in from remote mountain villages.

CURRENCY MARKET COMMENTARY

The rand weakened against the dollar early on Wednesday, as investors fretted about global growth ahead of the start of U.S. Federal Reserve Chair Jerome Powell's two-day testimony to Congress and domestic inflation data. At the close of the day, the rand was trading around R15.92 to the dollar, 0.17% softer. The dollar remained under pressure this morning as it looked set to extend declines against major peers to a fourth day, hurt by Treasury yields wallowing near two-week lows amid rising concerns of a recession.

COMMODITIES MARKET COMMENTARY

Gold prices were a touch lower today, with some support from a weaker dollar and U.S. Treasury yields, after the Federal Reserve's head said the central bank was fully committed to reining in inflation, and would try not to spark a recession in the process. Meanwhile, oil prices fell 2% in early trade this morning, extending losses from the previous day, as investors worried that aggressive U.S. interest rate hikes could trigger a recession and dent fuel demand.

LOCAL COMPANIES

PPC LIMITED (PPC) -19.1%

PPC is currently finalising its results for the twelve months ended 31 March 2022 (“the period”). In terms of the JSE Limited Listings Requirements, shareholders are advised that PPC is satisfied with a reasonable degree of certainty that the financial results for the period to be reported upon will differ by at least 20% from that for the previous corresponding period, being the twelve months ended 31 March 2021 (‘the prior period’). In accordance with IFRS 5 – Non-current assets held for sale, the group has accounted for its PPC Lime, Botswana Aggregates and PPC Barnet DRC businesses as discontinued operations. Earnings per share (“EPS”) from continuing operations for both the period and the prior period is impacted by material movements in non-cash items, being fair value and foreign exchange movements, impairments and impairment reversals. In addition, both EPS and headline earnings from Zimbabwe are impacted by hyperinflation accounting in terms of IAS 29. EPS for the period from continuing operations is expected to be a loss of between 3 cents and 7 cents per share, compared to the 65 cents per share profit for the prior period.

Headline loss per share for the period from continuing operations is expected to be between 1 cent and 5 cents per share, compared to the 3 cents headline earnings per share for the prior period. EPS for the Group (including discontinued operations) for the period is expected to be between 4 cents and 6 cents per share, a decrease of between 67% and 50% from the 12 cents per share for the prior period. Headline loss per share for the period for the Group is expected to be between 12 cents per share and 15 cents per share, an increase of between 20% and 0% from the 15 cents per share loss for the prior period. Earnings before interest, tax, depreciation and amortization (“EBITDA”) from continuing operations, excluding PPC Zimbabwe’s EBITDA, is expected to be between 0% and 4% lower than the prior period comparable EBITDA. Cash generated from continuing operations increased by between 4% and 8% relative the prior period. The financial information on which this trading statement is based is the responsibility of the directors of the Company and has not been reviewed or reported on by the Group’s independent external auditor. The Group’s audited annual financial statements for the year ended 31 March 2022 are expected to be released on or about 27 June 2022.

SAFARI INVESTMENTS RSA LIMITED (SAR) 0.0%

Although the last 6-months of the financial year ended 31 March 2022 (1 October 2021 to 31 March 2022) continued to be impacted by the period of civil unrest experienced in July 2021, property revenue recovered well due to tenant retention and improved trade at retail assets. The Company hereby advises that a reasonable degree of certainty exists that the final dividend distribution per share for the 6-month period ended 31 March 2022, will be between 31 cents and 33 cents. This represents an increase of between 24% and 32% compared to the final dividend distribution of 25 cents per share reported for the comparative 6-month period ended 31 March 2021. Accordingly, the Company hereby further advises that a reasonable degree of certainty exists that the aggregate distribution per share (comprising of the interim and final dividends) for the financial year ended 31 March 2022, will be between 56 cents and 58 cents. This represents an increase of between 33% and 38% compared to the aggregate distribution of 42 cents per share reported for the comparative 12-month period ended 31 March 2021.

INTERNATIONAL COMPANIES

Revlon (REV) +34.3%

Nail polish maker Revlon continued its surge as the latest so-called meme stock riding a wave of retail investor interest as the stock gained more than 50% in heavy trading on Wednesday. Shares of the $330 million market-cap company, which filed for bankruptcy last Wednesday, are up more than 400% since its lows on June 14 as retail investors appear to pile in to the company. The rally was reminiscent of the more than 500% surge in the shares of car rental firm Hertz Corp after it filed for bankruptcy in May 2020 following economic restrictions during the early stages of the coronavirus pandemic.

Berkshire Hathaway (BRK.B) -0.7%

Warren Buffett's Berkshire Hathaway bought another 9.6 million shares of Occidental Petroleum, boosting its stake to 16.3% as the oil company's shares come off the year's high. The purchases were made over the past week and cost about $529 million, Berkshire said in a regulatory filing on Wednesday. These come on top of a $336 million share purchase by Berkshire last month in the oil company, and $7 billion in purchases earlier this year. Following the purchases, Berkshire now owns about 152.7 million Occidental shares worth about $8.52 billion based on Occidental stock's Wednesday close, which is down over 21% since it touched its year's high in May.

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