LOCAL MARKET COMMENTARY

In July, South Africa's mining output experienced a 3.6% year-on-year decline, following a revised 1.3% increase in the previous month, according to data from Statistics South Africa. This decline was significantly below the 0.5% increase forecasted by analysts surveyed by Reuters. Despite this economic setback, the Johannesburg Stock Exchange saw positive results, with the All-Share index rising by 1.43% to close at 74,354 points and the Top-40 index by 1.52%. In related news, Postbank's board of directors has been removed from their positions following a forensic investigation that revealed the entity's unlawful maintenance of contracts with suppliers. This development follows a recent nationwide system failure that disrupted payments to 600,000 grant beneficiaries.

EUROPEAN MARKET COMMENTARY

European stock markets finished the day on a positive note as investors evaluated the European Central Bank's (ECB) decision to raise interest rates once more. The ECB chose to implement a 25-basis point increase, marking the 10th consecutive rate hike and pushing its main rate to 4%. Prior to the announcement, economists held differing views on whether the central bank would maintain rates or continue with further increases. The pan-European Stoxx 600 index closed 1.52% higher, building on a 0.3% increase observed prior to the ECB's announcement.

US MARKET COMMENTARY

The Dow Jones Industrial Average experienced a robust rally, marking its most significant increase in over a month. This surge was fuelled by optimism surrounding the revival of Wall Street's IPO market and favourable economic data. Arm shares saw a remarkable 24.7% surge as the chip design company began trading on Thursday. This IPO, considered the largest tech offering of the year, has the potential to invigorate a relatively sluggish IPO market. Additionally, the August producer price index indicated that core PPI, which excludes food and energy, remained under control last month, with a 0.2% increase, in line with economist expectations as polled by Dow Jones. However, the headline number showed a more substantial increase of 0.7%, surpassing the expected 0.4% rise.

ASIA MARKET COMMENTARY

Asia-Pacific markets saw positive gains driven by a series of economic data releases from China for the month of August that generally exceeded market expectations. China's National Bureau of Statistics data, released on Friday, indicated improved performance in both retail sales and industrial production. Retail sales registered a robust growth of 4.6% compared to the previous year, surpassing the 3% growth projected in a Reuters poll and also outpacing the 2.5% year-on-year growth recorded in July. Likewise, industrial production demonstrated strength with a 4.5% year-on-year increase in August, exceeding the forecast of 3.9% and showing faster growth than the 3.7% reported for July.

CURRENCY MARKET COMMENTARY

The South African rand lost ground against a strong U.S. dollar on Thursday, following disappointing monthly mining production figures that revealed a decline when analysts had anticipated growth. As the economic calendar for the remainder of the week remains relatively quiet, South African investors are focusing on upcoming local inflation data and an impending interest rate decision by the central bank next week. Meanwhile, the U.S. dollar remained stable in the Asian market, showing a slight pullback from its recent gains against other currencies, while the Chinese yuan strengthened due to positive economic data from China.

COMMODITY MARKET COMMENTARY

Gold prices were heading for their second consecutive weekly drop on Friday, influenced by U.S. inflation data from August that strengthened expectations of additional Federal Reserve interest rate hikes following an expected pause next week. In contrast, oil prices increased on Friday and were poised for their third consecutive weekly gain. This rise was driven by encouraging Chinese economic data and reports of record-breaking oil consumption, reinforcing the belief that demand in the world's second-largest oil consumer will continue to surge. 

Firstrand Limited (FSR) -3.2%

In 2023, the company reported a 12% increase in basic and diluted normalised earnings per share, reaching 653.7 cents, compared to 582.3 cents in 2022. Normalised earnings and headline earnings both experienced a 12% growth, totaling R36,669 million and R36,735 million, respectively. Normalised net asset value also increased by 10% to R180,698 million, while the normalised net asset value per share grew by 10% to 3,221.3 cents. The ordinary dividend per share rose by 12% to 384 cents. Return on equity (ROE) stood at 21.2% in 2023, slightly up from 20.6% in the previous year. Basic and diluted headline earnings per share increased by 12% to 655.3 cents, and basic and diluted earnings per share under IFRS grew by 11% to 648.7 cents. The net asset value per share under IFRS reached 3,220.3 cents, reflecting a 10% increase. In terms of financial performance, advances (net of credit impairment) showed a substantial 15% growth to R1,539,375 million, while deposits increased by 16% to R1,923,103 million. The credit loss ratio increased from 0.56% to 0.78%.

Metair Investments Limited (MTA) -6.4%

In the six months ending on June 30, 2023, the company reported impressive financial results (R‘000) with a substantial 31% increase in revenue, reaching R7,639,052, compared to R5,821,975 in the same period in 2022. Operating profit also showed significant growth, surging by 124% to R323,594 from R144,379 in 2022. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increased by 63% to R536,053. When including equity earnings before impairment, EBITDA reached R528,893, marking a remarkable 76% increase from the previous year. Earnings per share for the period were 48 cents, showing a 17% improvement. However, headline earnings per share declined by 9% to 41 cents. The number of shares in issue remained constant at 198,986, and the net asset value per share increased by 3% to 2,615 cents. The company significantly improved its cash flow, with cash generated from operations increasing by 88% to R151,195, while in the same period in 2022, it had experienced a cash outflow of R359,695.

African Rainbow Capital Investments Limited (AIL) -0.3%

As of June 30, 2023, the investment in the ARC Fund underwent the following changes: the intrinsic portfolio value surged from R13,659 million to R16,363 million, marking a net asset value increase of R2,151 million (19.8%); cash within the ARC Fund decreased from R669 million to R500 million, a reduction of R190 million (-25.3%); ARC Fund debt decreased from -R975 million (liability) to -R1,473 million, a decrease of R363 million (-51.1%); other net assets/(liabilities) in the ARC Fund increased from -R111 million to -R62 million, a rise of R49 million (-44.1%); UBI GP fee payable within the ARC Fund grew from -R110 million to -R61 million, an increase of R49 million (-44.6%); and other liabilities in the ARC Fund remained at -R1 million. In summary, the intrinsic investment in the ARC Fund at fair value through profit or loss (FVTPL) increased from R13,242 million to R15,328 million, reflecting a net asset value increase of R2,086 million (15.8%).

Tesla (TSLA) +1.8%

Tesla is reportedly on the verge of achieving a significant technological breakthrough that could revolutionize its electric vehicle manufacturing process and help Elon Musk realize his goal of cutting production costs in half. Building on its earlier innovation of using massive presses with 6,000 to 9,000 tons of clamping pressure for the "gigacasting" process, which reduced production expenses, Tesla is now advancing towards a method that would enable it to die-cast most of the intricate underbody of an electric vehicle in a single piece, as opposed to the approximately 400 parts found in a conventional car. This development is a crucial component of Tesla's "unboxed" manufacturing strategy, introduced by CEO Musk in March, which forms the foundation of the company's plan to produce tens of millions of more affordable electric vehicles in the next decade while maintaining profitability.

Arm Holdings (ARM) +24.7%

Shares in Arm Holdings, owned by SoftBank, experienced a remarkable surge of nearly 25% above their Nasdaq debut price, reigniting optimism in the stagnant initial public offering (IPO) market. The stock, which started trading at $56.10, witnessed a significant 24.68% increase, closing at $63.59. This surge elevated the valuation of the British chip designer to $65 billion as it returned to the public markets after a seven-year absence. Arm's impressive performance indicates a potential resurgence in investor demand for IPOs, a market segment that had faced challenges over the past two years due to geopolitical tensions and rising interest rates, according to market observers.

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