In Todays taking stock, we discuss Clicks announcement on the closure of its Musica entertainment business.
6 reading min
29 Jan 2021
SOUTH AFRICAN MARKET COMMENTARY
Stocks rose, with the Johannesburg Stock Exchange's Top-40 Index up 0.76% and the broader All-Share Index climbing 0.67% (now at 63,207 index points). Miners led the charge, with Sibanye-Stillwater, Anglo American Platinum and its parent Anglo American, which reported a rebound in production, as well as Gold Fields and a host of peers topping the blue-chip index. Among the worst performers were retailers including Shoprite, which closed down 3.27%. Share prices across the sector have been elevated in recent days after trading statements indicated it was bouncing back from the hefty blow dealt by the coronavirus pandemic.
EUROPEAN MARKET COMMENTARY
European shares closed slightly higher Thursday, clawing back from earlier losses as global markets reacted to earnings news and a speculative buying frenzy in heavily-shorted stocks. The pan-European Stoxx 600 ended the session up by over 0.1%, having fallen by more than 2% in early trade. Travel and leisure shares were the top gainers, rising 1.3%, while telecoms stocks fell 2.2% to lead losses. European airlines received a boost on Thursday, with British Airways parent IAG and Germany’s Lufthansa bouncing 4.7% and 6.3% respectively after American Airlines reported a better-than-expected loss for the fourth quarter of 2020.
US MARKET COMMENTARY
US stocks jumped on Thursday, roaring back from a sharp sell-off on Wall Street that saw the S&P 500 and the Dow Jones Industrial Average suffer their worst drop in three months. All 11 S&P 500 sectors closed in the green amid the broad market rally. Financials and materials — cyclical sectors sensitive to an economic recovery — jumped 1.9% and 1.8%, respectively. Industrials and health care also led the strong gains. GameStop, a red-hot target on the WallStreetBets Reddit chat room, fell 44% amid multiple trading halts, cutting its massive week-to-date gain to 197%.
ASIAN MARKET COMMENTARY
Asian stocks were mixed this morning after US shares rallied and the dollar eased overnight, as fears of social-media driven hedge fund selling abated and the US earnings season got off to a strong start. Concern about a hedge-fund rout that gripped the market on Wednesday eased after trading platforms Robinhood and Interactive Brokers restricted trading in GameStop, BlackBerry and other stocks that soared this week on speculative retail buying.
CURRENCY MARKET COMMENTARY
The rand firmed on Thursday, buoyed by exporters who helped shield it from souring sentiment toward risk currencies amid fears over global coronavirus cases and concerns over South Africa's debt. At the close the rand was 0.35% firmer at R15.21 per dollar. The local currency was trading around R15.27 this morning. The dollar remained on the back foot on Friday as an improvement in risk appetite sapped demand for the safest assets, with investors taking cheer from US economic data wasn’t as bad as feared.
COMMODITIES MARKET COMMENTARY
Gold prices were steady this morning as investors waited for developments around a US stimulus package, although the metal was on course to post a weekly and monthly decline hurt by a stronger dollar. Oil prices were mixed in early trade today as a pending supply cut by Saudi Arabia and lower US oil stocks helped counter risks of slowing fuel demand due to stalled vaccine rollouts and contagious new coronavirus strains.
Clicks (CKS) -1.4%
South Africa’s Clicks Group said on Thursday it had decided to close its Musica entertainment business due to the shift to digital consumption of music, movies and games, exacerbated by the Covid-19 pandemic. Acquired by the pharmacy group in 1992, Musica has been the country’s leading music and entertainment retail brand for several decades. But for several years “Musica has been operating in a declining market … owing to the structural shift globally to the digital consumption of music, movies and games from the traditional physical format,” Clicks said. “The inevitable demise of the brand has been accelerated by the Covid-19 pandemic which resulted in the rapid decline in foot traffic in destination malls where Musica stores are typically located.” Musica has closed 19 stores since the start of its 2021 financial year in September and is currently trading from 59, Clicks said. The remaining stores will be closed as leases expire over the next four months. In the stores which have been closed, Musica staff have been absorbed into the group’s health and beauty store network, the company said, adding management was committed to accommodating the remaining staff within the group “where this is operationally feasible.” Clicks also reported a 7.8% rise in group turnover to R14.6 billion ($955.24 million) in the 21-weeks ended January 24, helped by strong demand for immunity-building vitamins and supplements.
Steinhoff (SNH) -2.9%
Just four weeks into the new year and the Steinhoff share price has already almost doubled. It is the strongest and most sustained run in the share price since the group’s implosion a little over three years ago; an implosion that saw the share price plunge from around R56 in late November 2017 to a mere R5 a month later. It will be of little comfort to those who suffered in the R200 billion-plus value wipe-out to know that the current R2.10 is the strongest it’s been since early 2019. In January that year it edged above R2, but only briefly. Which way the share price will go from here is anyone’s guess, but it’s significant that it has held above R2 despite some relatively heavy selling midway through January. The only certainty is that it will never return to anything like its previous inflated levels. Currently investors are looking closely for signs of progress with the board’s long, drawn-out battle to avoid liquidation while occasionally glancing at the operations. A key part of the battle against liquidation is the proposed global settlement with the multiple parties that have launched billions of rands of legal claims against Steinhoff. The claims poured in after Steinhoff admitted it had overstated its financial position by more than R100 billion in the years leading up to the December 2017 implosion.
McDonald’s (MCD) -0.1%
McDonald’s on Thursday reported that US same-store sales jumped 5.5% in its latest quarter, but the coronavirus pandemic is still adding costs and slowing recovery in many of its international markets. As the fast-food giant enters 2021, it’s projecting that systemwide sales will rebound to surpass 2019 comparisons. McDonald’s posted fourth-quarter net income of $1.38 billion, or $1.84 per share, down from $1.57 billion, or $2.08 per share a year earlier. The company reported that higher restaurant closing costs of $30 million and lower gains on the sales of restaurant businesses hurt profits for the quarter. Excluding gains related to the sale of McDonald’s Japan stock and other items, McDonald’s earned $1.70 per share, missing the $1.78 per share expected by analysts surveyed by Refinitiv. Net sales dropped 2% to $5.31 billion, falling short of expectations of $5.37 billion. Worldwide same-store sales shrank by 1.3%, but improved from the third quarter.
01 February 2021
8 listening min
Market in a minute - Asian markets higher this morning.
JSE and global markets closed lower on Friday after a volatile week surrounding GameStop saga. Asian markets higher this morning with Tencent the standout up 5%.
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