Taking Stock - JPMorgan upgraded its view on South African equities.

In todays Taking stock, we look at how JPMorgan upgraded its view on South African equities to overweight from underweight last week.

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MARKET COMMENTARY

SOUTH AFRICA

Shares on the Johannesburg Stock Exchange closed lower on Friday. The All Share index finished 0.17% lower, while the Top 40 index dropped 0.12%. In other news, JPMorgan upgraded its view on South African equities to overweight from underweight last week. According to the group, the global value trade driven by faster economic growth, stronger commodity prices, a weaker dollar and fewer trade tensions with the incoming US administration will benefit domestic stocks such as banks and value cyclicals, at the expense of gold and tech firms. The local gold index shed 2.27% on Friday and is 23.22% down for the month so far.

 

 

EUROPE

European stocks rose after the European Central Bank reinforced expectations of further stimulus next month and Sweden’s Riksbank made a surprise increase to its quantitative-easing program. The pan-European STOXX 600 index rose 0.41% and MSCI’s gauge of stocks across the globe gained 0.39%. The European Union and Britain said substantial differences remained over a Brexit trade deal, as the EU chief negotiator prepared to travel to London in a last-ditch attempt to avoid a tumultuous finale to the five-year crisis.

 

 

US

US stocks rose on Friday as traders wrapped up a strong week amid decreasing political uncertainty and positive vaccine news. The Dow and S&P 500 rose 2.2% and 2.3%, respectively, for the week. The Nasdaq, meanwhile, posted a weekly gain of nearly 3%. Earlier in the week, the Dow jumped to an all-time high, breaking above 30,000 for the first time and hit an all-time high. Retailers led the early gains as investors bet on a strong holiday shopping season. Amazon shares gained 0.3%, and Shopify climbed 1.5% after Adobe Analytics said Thanksgiving Day online sales rose to a record $5.1 billion.

 

 

ASIA

This morning, China said that manufacturing activity expanded for the ninth straight month in November as the world’s second-largest economy continues to recover from a slump caused by the coronavirus pandemic. The official manufacturing Purchasing Managers’ Index (PMI) for November came in at 52.1, according to the National Bureau of Statistics. That’s the highest reading in more than three years and beating the 51.5 forecast. Mainland Chinese stocks were higher in early trade, with the Shanghai composite up 0.83%, while Hong Kong’s Hang Seng index dipped 0.28%. Markets elsewhere in the region were little changed today.

 

 

CURRENCIES

The rand was flat in early trade on Friday, but it was on course to end the week higher, buoyed by earlier momentum from positive developments around a COVID-19 vaccine that boosted hopes of a swift global economic recovery. At the week’s close, the rand traded at R15.26 against the dollar, 0.44% higher than its New York close on Thursday, when it lost some gains as investors turned their attention back to the grim outlook for the local economy. The rand has gained close to 6% against the dollar this month, as the greenback has been hurt by the uptick in global risk appetite.

 

 

COMMODITIES

Oil prices fell about 1% this morning amid investor jitters ahead of an OPEC+ meeting to decide whether the producers’ group will extend large output cuts to balance global markets. Analysts and traders expect the group to delay next year’s planned increase in oil output as a second COVID-19 wave has cut into global demand for fuel. Gold slipped today as upbeat equities fuelled by optimism over a coronavirus vaccine-led economic rebound offset a weaker dollar, putting bullion on course for its worst month in four years.   

LOCAL COMPANIES

Bidvest (BVT) +1.7%

The industrial conglomerate released a four-month trading update for the new financial year on Friday, informing shareholders that operating profits in stabilizing, as acquisitions offset the impact of COVID-19. Despite the negative economic growth, low consumer confidence, and continued restrictions on travel and tourism, revenue and profit were broadly in line with the previous period. CEO Mpumi Madisa: “the group digested the significant PHS acquisition while delivering value-added services and products into a changed operating environment”. The group acquired the UK-based hygiene group, PHS, in May 2020 for R9.1Bn amid the spike in hygiene demand during the crisis.

 

PBT Group (PBG) +0.3%

The JSE-listed small-cap data specialist posted a 21.4% jump in interim revenue to R389.3 million, with net profit increasing 22.9%, as it continues to benefit from the higher demand for cloud-based infrastructure amid the pandemic. The group provides data and analytics solutions and services, assisting clients to transform their data into tangible assets and streamlining their operations. Demand for digital services is rapidly growing, especially from the group’s financial services clients who contribute 78% of overall revenue. The tech group declared a 16 cents per share dividend, up from the 12 cents in the previous period.

INTERNATIONAL COMPANIES

Tesla (TSLA) +2.1%

The electric-vehicle (EV) maker’s share has jumped more than 600% during the year and has been on a tear after it was selected to be included in the S&P 500 benchmark index for the first time. On Friday the car maker passed Warren Buffett’s Berkshire Hathaway to become the sixth-largest US company by market capitalization. The group ended to week on a $555Bn market cap, topping Berkshire’s $543Bn, although in terms of assets, Berkshire dwarfs the group to the tune of $829.9Bn compared to $45.7Bn.

 

Disney (DIS) -1.3%

The entertainment conglomerate announced 4000 further job cuts as the global COVID-19 crisis, the subsequent lockdowns and travel restrictions forced the business to close its theme park operations. The latest rounds of layoffs will take the total number in the first half of the 2021 fiscal year to 32000 or 10% of the group’s total workforce, mostly at its parks, experiences and product divisions. “Due to the current climate, including COVID-19 impacts, and changing environment in which we are operating, the company has generated efficiencies in its staffing, including limiting hiring to critical business roles, furloughs and reductions-in-force”, the group said in a statement.

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