Taking Stock - The rand gained on Monday.

In todays taking stock, we discuss how the rand gain on Monday, shrugs off ratings downgrades that are likely to push up government borrowing costs.

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MARKET COMMENTARY

SOUTH AFRICA

Stocks rose yesterday, spurred on by vaccine hopes and a strong half-year performance by index heavyweight Naspers. The benchmark all-share index was up 1.02% and the blue-chip top 40 companies index was up by 1.19%. Media and internet giant Naspers, which has close to 30% weight on the two indices, was up 2.4% after e-commerce revenues rose 37% for the year ended September 30. Government bonds weakened, as the yield on the 2030 bond rose 8 basis points to 8.90%.

 

 

EUROPE

European stocks were mixed at the end of the day Monday, amid rising hopes that effective coronavirus vaccines will start getting rolled out soon. The pan-European Stoxx 600 closed flat provisionally, with oil and gas stocks bouncing 3.2% to lead gains while telecoms stocks slipped 1%. British pharmaceutical giant AstraZeneca on Monday said an interim analysis of clinical trials showed its coronavirus vaccine had up to 90% efficacy in protecting against the virus, making it the third inoculation this month that was revealed to be effective in trial data. IHS Markit's flash purchasing manager's index (PMI) index for the euro zone, which looks at activity in both manufacturing and services sectors, came in at 45.1 in November — the lowest reading in six months.

 

 

US

Stocks rose on Monday after AstraZeneca and the University of Oxford said their coronavirus vaccine was up to 90% effective, becoming the third inoculation this month that was revealed to be effective in trial data. Shares of cruise lines and airlines led the gains on hope distributing these vaccines would reopen the economy and boost travel early next year. The Dow hit its session high in the final hour of trading amid news that President-elect Joe Biden plans to nominate former Federal Reserve Chair Janet Yellen for Treasury secretary.

 

 

ASIA

Asian shares climbed this morning as news US President-elect Joe Biden was given the go-ahead to begin his White House transition added to an already brighter mood from progress made on COVID-19 vaccine and the prospects for a speedy global economic revival. Australia’s ASX 200 was 1.1% stronger, touching its highest level in almost nine months, with energy stocks leading the pack. Chinese blue-chips and Hong Kong’s Hang Seng were however outliers, edging down 0.75% and 0.08%.

 

 

CURRENCIES

The rand initially gained on Monday, lifted by global optimism over coronavirus vaccines and shrugging off ratings downgrades that are likely to push up government borrowing costs. At the close, the rand eventually traded at R15.42 versus the US dollar, down 0.04% from its previous close. The upbeat global market mood comes after a top official of the US government’s vaccine development effort said on Sunday that the first vaccines could be given to US healthcare workers and others recommended by mid-December. That outweighed the domestic impact of downgrades by Fitch and Moody’s deeper into junk territory on Friday that the finance minister called painful.

 

 

COMMODITIES

Gold prices eased in early Asian trade today as COVID-19 vaccine developments and upbeat US manufacturing data bolstered investors’ hopes of a swift economic recovery. Brent crude prices hit their highest levels since March as news of a third promising vaccine candidate spurred hopes of a quick recovery in oil demand, while US President-elect Joe Biden received the go-ahead to begin his presidential transition.

LOCAL COMPANIES

Netcare (NTC) -3.1%

The third largest hospital group listed on the JSE, but with the biggest network of private facilities in the country, is hoping that patient volumes will normalize around mid-2021. This comes as patient numbers dropped due to the COVID-19 crisis with elective surgeries postponed, leading to a revenue drop of 12.7% to R18.8Bn during the full-year. The hospital group estimated it lost R3.7Bn due to the pandemic, with profit tumbling 82.3% to R439 million from R2.4Bn in the prior year. The group ended its financial year with weekday occupancies of 56.2%, compared with 71.6% in the prior year.

 

Prosus (PRX) +2.6%

The Dutch e-commerce giant, with other global internet assets such as food delivery, payments and online education, is on the lookout for acquisitions as the group is sitting on $4.3Bn cash. “We continue to explore growth opportunities to advance our strategy, expand our ecosystem and position the business for sustainable growth”, the tech group said in a statement. The group posted strong revenue growth up 32% YoY to $12.7Bn, with food delivery revenue surging 141% as more people opted to order-in to avoid the virus. Core headline earnings increased 29% to $2.2Bn, boosted by improved profitability from e-commerce units and the growing contribution from Tencent.

INTERNATIONAL COMPANIES

AstraZeneca (AZN) -3.8%

The British pharmaceutical group announced on Monday interim analysis of clinical trials showed its COVID-19 vaccine candidate, has an average efficacy of 70% in protecting against the virus. This comes after late-stage trial readouts from Pfizer-BioNTech and Moderna with higher success rates. The pharma group developed the vaccine in collaboration with the University of Oxford, and assessed over two different dosing regimens. One dosing regimen was 90% effective when patients received a half dose, followed by a full dose at least one month apart. The other showed 62% efficacy when given as two full doses at least one month apart. “Excitingly, we’ve found that one of our dosing regimens may be around 90% effective and if this dosing regime is used, more people could be vaccinated with planned vaccine supply”, the group said in a statement.

 

Korn Ferry (KFY) +1.2%

The global consulting firm, which operates 104 offices in 52 countries, reported lower quarterly profit, as the group looks at cost-saving tactics amid the decline due to the pandemic. The group posted a profit of $27.8 million for its second quarter, or 51 cents a share, compared with a profit of $42.8 million, or 77 cents a share, in the comparable period last year, but well ahead of the consensus estimate of 5 cents a share. Gary Burnison: "Companies are rethinking their organizational structure, roles and responsibilities. How they compensate, engage and develop their workforce, along with the type of agile talent they hire and how they hire talent in a virtual world”.

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Media, Sasfin Wealth

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