China's PDD Loses $40 Billion in Market Value

LOCAL MARKET COMMENTARY

The Top 40 Index and the All Share Index on the South African stock market closed down by 0.33% and 0.19% on Monday, ending at 76,717 and 84,194 points, respectively. Investors are turning their attention to the upcoming releases of monthly producer inflation, money supply, budget, and trade balance data for insights into the health of the country's economy. Harmony Gold announced that it expects its profit for the full year ended June 30 to have likely doubled, driven by increased production, improved grades, and higher metal prices. Additionally, potential bidders have shown interest in acquiring AutoZone, a major automotive parts retailer and wholesaler in southern Africa, which entered voluntary business rescue on 1 July 2024.

EUROPEAN MARKET COMMENTARY

European stocks ended Monday with mixed results. In Germany, the Ifo survey revealed a decline in business sentiment for August, with the Ifo Business Climate Index falling to 86.6 points from 87.0 points in July, highlighting ongoing economic struggles. Investors are also looking ahead to the eurozone inflation data set to be released on Friday, which could provide clues on whether the European Central Bank might further cut interest rates next month.

US MARKET COMMENTARY

On Monday, the S&P 500 index fell, with major AI company Nvidia’s shares declining ahead of its upcoming quarterly report. Investors are closely watching new inflation data for clues about possible interest rate cuts by the Federal Reserve. According to the CME Group's FedWatch tool, there is a 70% chance of a 0.25% rate cut and a 30% chance of a 0.50% cut in September. Additionally, the important Personal Consumption Expenditure (PCE) report for July, which the Fed uses to measure inflation, is expected on Friday and could provide further insights into future policy decisions.

ASIA MARKET COMMENTARY

Asia-Pacific markets mostly declined this morning, following the losses in the S&P 500 and Nasdaq from last night. Investors were also digesting industrial profit data from China, which showed a slight improvement with profits rising by 3.6% year-on-year from January to July, up from 3.5% growth in the January to June period.

CURRENCY MARKET COMMENTARY

South Africa's rand remained stable on Monday as the market awaited upcoming economic data releases that could provide insights into the state of the local economy. The dollar edged higher this morning, while major currencies mostly traded sideways. Ongoing concerns about tensions in the Middle East tempered investors' optimism about potential U.S. interest rate cuts in the near future.

COMMODITY MARKET COMMENTARY

Gold prices surged on Monday, nearing their recent record high, driven by strong expectations of a September interest rate cut after dovish comments from Federal Reserve Chair Jerome Powell and increased safe-haven demand due to geopolitical tensions in the Middle East. Meanwhile, oil prices paused their recent rally, pulling back in Asian trading this morning after climbing more than 7% over the previous three sessions due to supply concerns related to fears of a broader Middle East conflict and the shutdown of Libyan oil fields.

Harmony Gold Mining Company Limited (HAR) -0.75%

Harmony's shareholders are informed that the company's basic earnings for FY24 are expected to be significantly higher than those of FY23, mainly due to increased gross profit. Earnings per share (EPS) are projected to be at least 1 385 South African cents (or 72 US cents), marking a 78% increase in South African cents and a 64% increase in US cents compared to the previous year. Headline earnings per share (HEPS) are expected to more than double, reaching at least 1 852 South African cents (or 98 US cents). This improved performance is driven by higher recovered grades, increased gold production, a higher average gold price, and additional gains from silver and uranium production at certain operations.

ADvTECH Limited (ADH) +0.70%

Revenue increased by 9% to R4 274 million, while operating profit rose by 15% to R865 million compared to the same period last year. Normalised earnings grew by 17% to R535 million, leading to a 16% increase in normalised earnings per share (NEPS) to 97.7 cents. Both headline earnings per share (HEPS) and earnings per share (EPS) also increased by 16% to 97.7 cents and 97.6 cents, respectively. Additionally, an interim dividend of 38.0 cents per share was declared, up from 30.0 cents per share in the previous period.

Italtile Limited (ITE) +1.01%

The company reported a system-wide turnover of R11.5 billion, remaining unchanged from the previous year. However, trading profit decreased by 11% to R2.1 billion, and earnings per share (EPS) dropped by 8% to 122.1 cents. Headline earnings per share (HEPS) also fell by 7% to 123.0 cents. The store network contracted by 4% to 208 stores. Despite these declines, the ordinary dividend per share decreased by 8% to 49.0 cents, while a special dividend per share increased by 100% to 78.0 cents, bringing the total dividend per share up by 140% to 127.0 cents. Additionally, the net asset value per share rose by 10% to 707.5 cents, and cash and cash equivalents surged by 76% to R1.8 billion.

Stadio Holdings Limited (SDO) +6.31%

For the six months ended 30 June 2024, revenue increased by 16% from R714 million to R826 million. Student numbers in Semester 1 grew by 10%, and overall student numbers rose by 9% from August 2023 to August 2024. Earnings before interest, taxation, depreciation, and amortisation (EBITDA) increased by 12% to R236 million. Earnings per share (EPS) and headline earnings per share (HEPS) both grew by 20%, reaching 16.3 cents and 16.2 cents, respectively. Core headline earnings rose by 19% to R137 million, and core headline earnings per share (Core HEPS) also increased by 19% to 16.2 cents. Net asset value per share saw a modest rise of 2% to 216 cents. No interim dividend was declared for the period.

PDD Holdings Inc. (PDD) -28.51%

China's PDD Holdings missed market expectations for its quarterly revenue on Monday, leading to a sharp drop in its share price by over 28%, the largest one-day decline since the company went public in the U.S. in 2018. This plunge wiped out nearly $40 billion in market capitalization. PDD, which operates the discount platforms Pinduoduo in China and Temu internationally, reported second-quarter revenue of 97.06 billion yuan ($13.64 billion), falling short of analysts' average estimate of 100 billion yuan. The company's operating expenses surged by 48% as it ramped up marketing, advertising, and promotions to attract customers. Additionally, general and administrative costs more than tripled to 1.84 billion yuan, largely due to increased staff-related expenses.

Nvidia Corporation (NVDA) -2.25%

Nvidia is expected to report on Wednesday that its second-quarter revenue more than doubled, with a year-over-year increase of approximately 112% to $28.68 billion, according to LSEG data. Despite this significant growth, investors accustomed to Nvidia's blockbuster results may be looking for even more from the AI chip giant. The company's adjusted gross margin is likely to have declined by over 3 percentage points to 75.8% from the previous quarter, due to the costs associated with ramping up production to meet rising demand. Looking ahead, Nvidia is likely to forecast a 75% increase in third-quarter revenue to $31.69 billion, signalling the end of its five-quarter streak of triple-digit growth, which included a surge of around 206% to $18.12 billion a year ago. For the past three quarters, Nvidia's growth has consistently exceeded 200%.

BHP Group Ltd (BHP) +0.42%

BHP Group plans to grow its copper business through existing and upcoming projects following its unsuccessful bid to acquire Anglo American. The company reported a 2% increase in annual underlying profit, reaching $13.66 billion for the year ended June 30, exceeding market expectations of $13.26 billion. This profit, which excludes exceptional items, also surpassed last year's figure of $13.42 billion. However, BHP faced a $5.7 billion hit due to impairments in its nickel business in Western Australia and the 2015 Samarco dam collapse in Brazil. The company’s net debt stood at $9.1 billion, within its target range of $5 billion to $15 billion. BHP declared an interim dividend of 74 cents per share, resulting in a full-year dividend of $1.46 per share, which, while the lowest since 2020, remains among the highest in its history.

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