Taking Stock

Daily insights and analysis on stocks

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Market Performance

SOUTH AFRICA

  • In the local equities market, stocks gave back the previous session’s gains as investors focused on negative company results and earnings forecasts.
  • Both the JSE All-Share index (at 56,131 index points) and Top 40 index fell 0.35%.
  • TFG closed 4.80% weaker after the fashion retailer said it expects its half-year profit to fall by 20% as sales declined due to store closures during COVID-19 lockdown restrictions.
  • The weak earnings forecast and sales numbers even as restrictions eased also pushed its rivals Woolworths Holdings and Truworths down 2.50% and 3.29%, respectively.
  • Leading the decliners was PPC down 13.51% after the cement maker said it will do a capital raise and sell assets as part of restructuring agreements with its South African lenders.

EUROPE

  • European stocks closed higher on Tuesday as investors shifted their focus to upcoming central bank meetings by the US Federal Reserve, Bank of Japan and Bank of England.
  • Yesterday, data showed that sentiment in Germany’s economy significantly exceeded expectations in September.
  • In terms of individual share price action, H&M rallied more than 10.79% after beating third-quarter profit expectations, while Fiat Chrysler also added 9% after a revision of its planned merger with Peugeot maker PSA.

ASIA

  • Stocks in Asia were mixed this morning as investors await the Federal Open Market Committee’s quarterly update.
  • In Japan, the Nikkei 225 was fractionally higher in morning trade.
  • The move comes after provisional trade data from Japan’s Ministry of Finance released today showed the country’s exports in August falling 14.8% as compared to a year ago.
  • That compared against a 16.1% drop expected by economists in a Reuters poll.

UNITED STATES

  • US stocks finished mostly higher yesterday as the blue-chip Dow shed early gains ahead of a policy update by the Federal Reserve.
  • The Nasdaq led the broader market rally as technology shares continued to make up lost ground from last week’s selloff.
  • A pickup in merger-and-acquisition activity helped tech shares regain their footing, perhaps prompting investors to reason that valuations weren’t so stretched.
  • The Federal Reserve started its policy-setting meeting on Tuesday, which will be followed by a news conference and policy statement today, while central-bank decisions from the Bank of England and the Bank of Japan are due on Thursday.

CURRENCIES

  • The rand climbed to a six-week best on Tuesday as demand for risk assets was lifted by renewed hopes for a COVID-19 vaccine and solid industrial and retail data from China.
  • At the close, the rand was 1.26% firmer at R16.46 per dollar.
  • The dollar and the yen both found support this morning as traders finessed positions ahead of a US Federal Reserve policy decision.
  • Later today, the Fed concludes its first meeting since adopting a more accommodative approach to inflation.

COMMODITIES

  • Gold prices held steady this morning as investors awaited the outcome of the US Federal Reserve's policy meeting, hoping for details of the central bank's plans to balance interest rates against its inflation target.
  • Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.
  • Gold also is used as a hedge against inflation and currency debasement.
  • Oil prices rose this morning, extending gains from the previous session, as a hurricane disrupted US offshore oil and gas production and an industry report showed a big drop in US crude stockpiles.

Domestic Company News

HARMONY GOLD (HAR) +3.7%

  • The dual-listed South African gold miner swung to an annual loss of R828 million ($53 million), impacted by derivative losses of about R1.7Bn caused by a weaker exchange rate, this despite the miner increasing revenue on the back of higher precious metal prices.
  • The miner posted a headline loss per share of 164 cents for the year versus a profit of 204 cents per share a year earlier.
  • The group looks set to benefit from its nearly acquired Anglo Gold assets, Mponeng underground gold mine and Mine Waste Solutions surface gold recovery operations, with CEO Peter Steenkamp adding, "at the current great gold price, these assets will immediately hit the ground running”.

REMGRO (REM) +1.3%

  • The investment holding company, chaired by Johann Rupert, warned shareholders on Tuesday that profit could tumble as much as 75%.
  • HEPS from continued operations is expected to drop between 65% and 75% from the previous period’s 981.4 cents.
  • The HEPS has been adjusted for the group’s unbundling of its 28.2% interest in RMB Holdings in June.
  • “The decrease in headline earnings from continuing operations is mainly due to the negative impact the COVID-19 pandemic and the resultant lockdown measures had on the earnings of most of Remgro’s underlying investee companies,” the group said.

TRANSACTION CAPITAL (TCP) -0.8%

  • The group released a trading statement that saw the group end its 5-year profit growth streak, as the global pandemic disrupted its operations.
  • The group’s core operations are SA Taxi, which provides finance and insurance to minibus taxi operators, and Transaction Capital Risk Services (TCRS), which is involved in debt collection and payment processes.
  • The group warned that core headline earnings can fall as much as 80% from the previous year’s R803 million.
  • Commenting on the local taxi industry the group said, “the industry has recovered quickly and transitioned smoothly to near-normalised operational activity as lockdown restrictions have been eased and the economy reopens”.

Global Company News

ADOBE SYSTEMS (ADBE) +2.4%

  • Shares in the US-based software group jumped 3% in after-hours trading, as the group reported Q3 earnings that topped Wall Street expectations.
  • The tech group posted net income of $955 million, or adjusted earnings of $2.57 per share, compared with net income of $793 million, or $1.63 a share, in the prior year.
  • Group revenue jumped 14% to a record $3.23Bn from $2.8Bn previously, edging to $3.16Bn analysts pencilled in.
  • CEO Shantanu Narayen: “Adobe delivered the best Q3 in our history in a challenging macroeconomic environment, demonstrating the global demand for our innovative solutions.”

HENNES & MAURITZ (HM.B) +10.8%

  • Swedish listed, Hennes & Mauritz or simply H&M, the world’s second biggest fashion retailer edged quarterly profit forecasts on Tuesday, as the group recovered quicker than expected after the COVID-19 impact in the previous quarter.
  • The retailer said at the start of the quarter, 900 of its 5000 stores globally were still closed due to the lockdowns, but currently there are only around 200 still temporarily closed.
  • Preliminary Q3 results showed profit before tax of approximately 2Bn Swedish crowns ($228 million), however this was still far of the 5Bn crowns in the previous comparable period.
  • “More full-price sales combined with strong cost control enabled the company to already turn to profit in the third quarter”, the group said.

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