Taking Stock - Apple can no longer force developers to use in-app

In today's taking stock we discuss. Apple will no longer be allowed to prohibit developers from providing links or other communications that direct users away from Apple in-app purchasing.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks listed on the Johannesburg Stock Exchange ended Friday marginally stronger but with a heavy loss seen during the week on the back of losses suffered by index heavyweights Naspers and mining companies. The country's biggest company, tech investor Naspers, and its subsidiary Prosus, corrected sharply this week as China continued to clamp down through regulations on internet and gaming companies including Tencent. Mining companies also have been losing most of their yearly gains in prices as commodity prices show signs of a decline after a strong run till around mid of August. The benchmark All-Share index ended the day up 0.19% (to 64,296 index points) but was down over 3% from last Friday. The blue-chip Top 40 index closed up 0.27%.

 

 

EUROPEAN MARKET COMMENTARY

European stock markets closed lower on Friday, reversing earlier gains, as traders weighed concerns over rising inflation and central bank action. The pan-European Stoxx 600 closed down 0.3%, after having climbed earlier in the day. The benchmark also finished the week in the red, falling 1.2%. Utilities shares led the losses Friday, down 1.3%. European investors continued to digest the European Central Bank’s decision on Thursday to slow down bond buying under its pandemic emergency purchase programme (PEPP) in response to higher inflation and stronger GDP growth across the euro zone. The ECB also modestly revised up its medium-term inflation forecasts.

 

 

US MARKET COMMENTARY

The Dow Jones Industrial Average declined for a fifth straight day Friday as economic uncertainty loomed. Apple was the biggest laggard weighing on the Dow, down 3.3%. The tech giant can no longer force developers to use in-app purchasing, a federal judge ruled Friday in a closely watched trial between Apple and Epic Games. The S&P 500 and the Dow haven’t recovered since the poor jobs report last Friday, falling each day since, including all four trading days of the holiday-shortened week. Investors are worried about persistent Covid cases slowing the economy just as hot inflation causes the Federal Reserve to take away easy policies.

 

 

ASIAN MARKET COMMENTARY

Shares in Asia-Pacific largely slipped in early morning trade today, with stocks in Hong Kong leading losses. Hong Kong-listed shares of Alibaba dropped 3.04% following a Financial Times report that Beijing wants to break up Ant Group’s Alipay and force the creation of a separate loans app. Chinese property developer Soho China plunged 36% in the morning after a takeover deal by Blackstone Group fell through. Soho China said in a filing on Friday that Blackstone has decided not to go through with its $3 billion bid to buy the developer.

 

 

CURRENCY MARKET COMMENTARY

The rand posted its third consecutive week of gains on Friday, scaling back to a level seen two months ago as stronger local data and a risk-on mood globally supported the currency against the dollar. At the close, the rand was trading around R14.21 versus the dollar, 0.09% softer on the day. The rand was 1.1% firmer for the week. The upbeat mood was further bolstered by South Africa's second-quarter gross domestic product number which grew 1.2% quarter on quarter, versus expectations for 0.7% growth.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices were subdued this morning as the dollar held firm, while cautious investors awaited readings on U.S. consumer prices due this week that could be crucial to Federal Reserve’s decision on when to exit its super-supportive policy. Oil prices climbed earlier today to a one-week high in a second straight session of gains as concerns over U.S. supplies following damage from Hurricane Ida supported the market, along with expectations for higher demand. About three-quarters of the U.S. Gulf’s offshore oil production, or about 1.4 million barrels per day, has remained halted since late August - roughly equal to what OPEC member Nigeria produces.

LOCAL COMPANIES

City Lodge (CLH) -2.0%

JSE-listed City Lodge Hotel Group is anticipating some easing of the severe Covid-19 storm the hotel and hospitality industry has been buffeted by over the past about 18 months. City Lodge CEO Andrew Widegger said on Friday the group remains cautiously optimistic that the worst of the pandemic is behind the group because an encouraging portion of the South African population has been vaccinated and “very soon we can all once again embrace the freedom of travel and hospitality”. “The success of the vaccination programme is integral to the recovery of the hospitality industry,” he said. “There is pent-up demand as we emerge from the 18-month confinement within our homes, to begin to explore, socialise and experience life.” However, Widegger said the impact of the prolonged economic recovery from the pandemic, and the resurgent waves of infections, has impacted the length of time it will take to return to pre-Covid-levels of operations and break-even. Widegger said the group has drawn R650 million of the total available loan facilities of R800 million and also has access to an overdraft facility of R115 million. He pointed out that the group’s funders recently approved an extension of the repayment date of a R100 million loan from September 2021 to September 2022 and access to an additional R100 million, which is included in the total R800 million available facilities, in addition to waiving the original debt covenants to the September 2022 measurement period. Widegger said occupancies based on total inventory in the group have steadily improved from 4% in the last quarter of the 2020 financial year to 7% in July 2020 when the group reopened a total of 36 hotels as the Level 5 hard lockdown regulations were slightly relaxed. Revenue in the year decreased by 56% to R507.8 million from R1.16 billion in the prior year. Operating costs, excluding depreciation and amortisation, dropped by 22% to R570.4 million from R735.8 million. Widegger said the operating cost reductions were mainly due to the cost-containment measures put in place from April 2020 to mitigate the extent of the losses arising from minimal revenues. The group made a net loss of R804.6 million compared to the net profit of R486.6 million in the prior year.

 

Steinhoff (SNH) +5.9%

South African retailer Steinhoff International said on Friday it had gained more approval from claimants for its proposed lawsuit settlement offer to those who lost money when it revealed holes in its accounts in December 2017. The proposal gained the final vote from contractual claimants – those who sold their businesses to Steinhoff in consideration for shares in the retail group – to move the group closer to finalising a deal that has been a major headache since the company’s restructuring. Closing the chapter on litigation claims will enable Steinhoff, the majority owner of Pepkor in Africa and Pepco in Europe, to focus attention on its mountain of debt that exceeds 9 billion euros ($10.64 billion) and continued recovery from the fraud scandal. The proposal got the required 75% approval from contractual claimants, Steinhoff, which is registered in the Netherlands, said in a brief statement.

INTERNATIONAL COMPANIES

General Motors Company (GM) +2.2%

General Motors’ vehicle sales and production will be hit harder by the global chip shortage during the second half of the year than it previously expected, its finance chief said Friday. The shortage will cut GM’s wholesale deliveries by about 200,000 vehicles in North America during the second half of the year compared with the 1.1 million it delivered in the first half of the year, CFO Paul Jacobson said. That reduction is double the 100,000 units that was expected when GM reported second-quarter earnings in August.

 

Apple (AAPL) -3.3%

Apple’s lucrative App Store business received a major blow Friday thanks to a federal judge’s decision in the company’s legal battle with Epic Games. Judge Yvonne Gonzalez Rogers handed down the decision in the closely watched trial, and issued an injunction that said Apple will no longer be allowed to prohibit developers from providing links or other communications that direct users away from Apple in-app purchasing. Apple typically takes a 15% to 30% cut of gross sales.

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Research Team
Media, Sasfin Wealth