Local Market Update

On the Johannesburg Stock Exchange, both the Top-40 index and the All-Share index closed approximately 0.3% lower at 72,763 and 77,962 points, respectively. Balwin Properties, however, delivered positive news as it announced increased profitability for the financial year ending on February 28, 2023. Despite facing challenges such as reduced apartment sales and rising interest rates, the company reported a 21% rise in headline earnings per share, reaching 91.49 cents. Another JSE-listed firm, Astral Foods, disclosed that it incurred R741 million in "load shedding costs" during the six-month period ending in March 2023, which it was unable to recover.

European Market Update

European stock markets had a mixed performance on Monday, with attention focused on the Greek election results. The pan-European Stoxx 600 initially gained marginally but ended the day 0.01% higher. In Greece, the Athens General Composite Index surged by nearly 7% after the ruling conservative party, New Democracy, secured a strong lead in Sunday's elections. Discussions will now commence regarding a potential second election, as the party narrowly missed obtaining a parliamentary majority. Greek Prime Minister Kyriakos Mitsotakis declined the option to form a coalition government.

US Market Update

The S&P 500 closed little changed on Monday as investors awaited a critical debt ceiling meeting and officials worked to prevent a default. Negotiations resumed between veteran representatives from both sides, but mandatory government spending cuts remained a significant obstacle. Attention also turned to the release of the Federal Reserve minutes from the May meeting on Wednesday, which could provide insights into the central bank's stance on the possibility of future interest rate hikes. While the first-quarter earnings season is winding down, notable reports are expected from Zoom Video, Lowe's, and Dick's Sporting Goods.

Asia Market Update

Asia-Pacific markets displayed a mixed performance on Tuesday as talks between U.S. President Joe Biden and House Speaker Kevin McCarthy concluded without an agreement. Meanwhile, South Korea experienced an increase in consumer sentiment in May, reaching its highest level in a year according to data from the Bank of Korea. Hong Kong witnessed a 2.1% inflation rise in April compared to the same period last year, slightly exceeding economists' expectations of 2%. April's inflation also surpassed the 1.7% recorded in March.

Commodity Market Update

Gold prices declined due to a stronger dollar and hawkish comments from some Federal Reserve members. Investors remained watchful of the ongoing U.S. debt ceiling situation. Conversely, oil prices continued to rise as a result of anticipated market tightening driven by seasonal growth in gasoline demand and production cuts implemented by OPEC+ producers. However, concerns over the potential risk of a U.S. debt default limited gains.

Currency Market Update

The rand strengthened on Monday, relieved by the absence of a credit rating downgrade for South Africa and expectations of a significant interest rate hike by the central bank later in the week. Analysts surveyed by Reuters anticipate a 25-basis-point rate increase by the South African Reserve Bank (SARB) on Thursday, potentially marking its final hike for 2023. However, markets have adjusted their expectations and are now pricing in a larger rate hike. At the close of the session, the rand traded at around R19.24 against the dollar, showing a 0.29% gain. The dollar reached a six-month high against the yen on Tuesday as expectations grew that U.S. interest rates would remain higher for an extended period, while the unresolved debt ceiling situation maintained fragility in risk sentiment.

ASTRAL FOODS LIMITED (ARL) -5.0%

The financial results for the company are presented for the periods ending on March 31, 2023 (unaudited), March 31, 2022 (unaudited), and September 30, 2022 (audited). The revenue from continuing operations for the six months ended March 31, 2023, was R9,963,795, showing a 6% increase compared to R9,427,269 for the same period in 2022 and R19,333,850 for the 12 months ended September 30, 2022. Revenue from discontinued operations was not applicable in the current period but was R91,553 for the same period in 2022 and R125,795 for the 12 months ended September 30, 2022. The profit before interest and tax (operating profit) from continuing operations was R98,047, representing an 88% decrease compared to R785,326 for the six months ended March 31, 2022, and R1,439,778 for the 12 months ended September 30, 2022. The profit for the period from continuing operations was R62,037, showing an 89% decrease compared to R546,860 for the same period in 2022 and R1,054,616 for the 12 months ended September 30, 2022. The total assets increased to R9,006,990 (up 11%) from R8,139,428 as of March 31, 2022, and R8,438,309 as of September 30, 2022. The total equity increased slightly to R4,571,825 from R4,508,355 as of March 31, 2022, but decreased from R4,786,007 as of September 30, 2022. The total liabilities increased to R4,435,165 (up 22%) from R3,631,073 as of March 31, 2022, and R3,652,302 as of September 30, 2022. The earnings per share decreased to R1.62 (down 89%) from R14.56 for the same period in 2022 and R27.81 for the 12 months ended September 30, 2022. The headline earnings per share also decreased to R1.63 (down 88%) from R14.20 for the same period in 2022 and R27.62 for the 12 months ended September 30, 2022. Dividends per share declared out of earnings for the period were R7.90 for the interim dividend in 2022 and R5.90 for the final dividend, resulting in a total dividend of R13.80.

BARLOWORLD LIMITED (BAW) +0.4%

In the first half of the year, the company experienced a significant improvement in basic earnings per share, which increased to 711.3 cents compared to a loss of 31.6 cents in the same period last year. However, headline earnings per share (HEPS) showed a decrease of 42.4 cents or 5.6%, reaching 713.2 cents (1H22: 755.6 cents). HEPS from continuing operations, on the other hand, demonstrated positive growth, improving by 29.4% to 578.1 cents (1H22: 446.8 cents). The company achieved a 12.9% increase in revenue from continuing operations, totaling R20.8 billion. Operating profit from core trading activities also experienced a positive trend, rising by 16.5% to R2.1 billion from R1.8 billion in 1H22. This improvement resulted in an operating profit margin of 10.1%. The company's enhanced group return on invested capital (ROIC) reached 14.3% (1H22: 14.1%). Additionally, the company declared an ordinary dividend of 200 cents per share (cps), compared to 165 cps in 1H22.

META (META) +1.1%

European privacy regulators have imposed a record-breaking fine of 1.2 billion euros ($1.3 billion) on Meta (formerly known as Facebook) for its handling of EU user data transferred to the United States. The penalty follows a case initiated by Austrian privacy advocate Max Schrems, who argued that the existing framework for EU-US data transfers failed to safeguard Europeans from U.S. surveillance practices. Various methods for legally transferring personal data between the EU and the U.S. have faced scrutiny, including the Privacy Shield framework, which was invalidated by the European Court of Justice in 2020. Meta employed a mechanism called standard contractual clauses to facilitate data transfers to and from the EU, which had not been challenged in court within the EU. However, the Irish data protection authority determined that these arrangements did not adequately address the concerns raised by the European Court of Justice regarding the protection of individuals' rights and freedoms. The Data Protection Commission of Ireland has instructed Meta to halt any future transfers of personal data to the U.S. for a period of five months. This 1.2 billion euro fine marks the largest penalty ever imposed for a violation of the General Data Protection Regulation (GDPR), surpassing the previous record of 746 million euros imposed on e-commerce giant Amazon in 2021. In response, Meta has expressed its intention to appeal the decision and the accompanying fine.

JPMORGAN CHASE (JPM) -0.8%

Following its acquisition of First Republic, JPMorgan Chase has revised its key performance target, indicating an increase in net interest income. In investor presentation slides on Monday, the New York-based bank announced that it expects to generate approximately $84 billion in net interest income for the year. This figure is $3 billion higher than the guidance provided in April. The earlier guidance had already been raised by $7 billion, leading to a significant surge in JPMorgan's stock on its best earnings day in two decades. However, the bank acknowledged that uncertainties related to deposits and the overall economy could potentially impact its forecast. Net interest income represents the disparity between the revenue banks earn from loans and investments and the interest they pay to depositors.

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