Taking Stock - SAB turns investment taps back on for home market

In today's taking stock we discuss, South African Breweries (SAB), part of Anheuser-Busch InBev, has reinstated its investment programme that was cancelled last year, allocating R2 billion ($148.12 million) for its home operations.

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Stocks on the Johannesburg Stock Exchange (JSE) ended marginally up on Tuesday as investors globally continued to toggle between inflation concerns and faster economic growth prospects. The local stock market has largely mirrored the performance of Wall Street in the last few months, driven up by low interest rates. However, the JSE lost some of its gains recently as concerns around a spike in US inflation gripped investors with fears of an impending interest rate hike by the US Federal Reserve. The FTSE/JSE benchmark All-Share index closed up 0.1% (now at 67,645 index points) while the blue-chip Top 40 index ended up 0.11%.



European stocks closed slightly higher Tuesday after revised euro zone growth data showed the region’s economy contracted by much less than expected in the first quarter of the year. Revised data from the EU’s statistics office Eurostat showed gross domestic product (GDP) in the 19-member euro zone contracted 0.3% quarter-on-quarter, compared with the last estimate predicting a 0.6% contraction. However, data showing an unexpected fall in Germany’s industrial output in April weighed on sentiment. The pan-European Stoxx 600 index finished Tuesday’s session up about 0.1% higher. Travel shares led the gains, climbing 1.8%, while auto shares fell 1.1%.



US stocks closed flat on Tuesday after turning in a lacklustre performance as investors refrained from making significant moves, choosing to wait for the consumer inflation data, due later in the week. Data released by the Commerce Department Tuesday morning showed US trade deficit narrowed in the month of April, falling to $68.9 billion from a revised $75 billion in the previous month. Economists had expected the deficit to narrow to $69.0 billion from the $74.4 billion originally reported for the previous month.



Shares in Asia-Pacific were mostly lower in morning trade today, as investors reacted to the release of Chinese inflation data. On the economic data front, China’s producer price index for May jumped 9% from a year earlier, against expectations in a Reuters poll for an 8.5% increase. The country’s consumer price index in May rose 1.3% from a year earlier, lower than an expected 1.6% rise in a Reuters poll.



The rand dipped slightly against the dollar on Tuesday, as a recovering dollar put the brakes on the currency's recent rally despite better-than-expected economic growth data. The rand was 0.76% softer at the close of the day, as it traded around R13.58 to the dollar. Economic growth data showed slower activity in the first quarter compared to the last quarter of 2020, but the figure was better than expectations, limiting some currency selling. On an annualised basis, the economy grew by 4.6%, above poll expectations of 2.5%. Mining led the charge in primary sector, expanding 4.2%.



Gold prices inched higher this morning, helped by a fall in US bond yields, with investors holding back from making large bets ahead of US inflation data and the European Central Bank policy meeting this week. Oil prices rose for a second day today on signs of strong fuel demand in Europe, while the prospect of a near-term return of Iranian oil supply faded as the US secretary of state said sanctions against Tehran were unlikely to be lifted.


South African Breweries

South African Breweries (SAB), part of Anheuser-Busch InBev, has reinstated its investment programme that was cancelled last year, allocating R2 billion ($148.12 million) for its home operations, the company said on Monday. The maker of Carling Black Label and Castle Lager beer had cancelled R2.5 billion for the 2020 financial year and in January cancelled a further R2.5 billion of investment earmarked for 2021 due to a challenging operating environment, regulatory uncertainty and a third local ban on alcohol sales in the country. South Africa had banned alcohol sales as part of efforts to free up space in hospitals burdened with alcohol-related injuries for Covid-19 patients. In its latest move to curb the third-wave of infections, alcohol sales were not banned but gatherings have been reduced. The capital injection is earmarked for projects to be completed in the financial year 2022. Projects include upgrades to operating facilities, installation of new equipment at selected plants, product innovations and other necessary operating systems, SAB said in a statement. “The move to implement reasonable measures, as we continue to navigate the pandemic, is a welcomed signal that we can expect to see more consultation in the future and that blanket bans will be a thing of the past,” SAB VP Finance and Legal, Richard Rivett-Carnac said. “Further collaboration will provide the required confidence boost needed in order to attract further investment to the country.”


Resilient REIT (RES) +2.5%

Comparable retail sales are affected by the trading restrictions imposed as a result of the COVID pandemic. For the 10 months to April 2021, retail sales of the South African portfolio increased by 6,6% (when compared to the 10 months to April 2020). In April 2020, the level 5 restrictions resulted in non-essential retailers being unable to trade. If the effect of April is excluded, retail sales for the nine months to March 2021 declined by 0,2% (when compared to the nine months to March 2020). Varying levels of restrictions continue to impact leisure and entertainment tenants. Resilient has continued its support for these tenants with a further R14million of discounts provided during the past five months. Tenant discounts now total R58 million for the financial year to date. At May 2021, the pro rata share of vacancies was 2,5% in the South African portfolio and 7,0% in the Nigerian portfolio.


Tesla (TSLA) -0.3%

Tesla’s sales in China rose in May from the prior month, but failed to recover levels seen in March, according to the China Passenger Car Association. Tesla sold 33,463 electric cars in May, up 29% from April’s 25,845 units, data released late Tuesday showed. The number still fell short of March’s 35,478 car sales. The rebound in sales comes despite growing negative press and regulatory scrutiny on Tesla over customer reports of brake failures. The auto industry has also cut production due to a global shortage in chips. Tesla shares fell 0.25% in the overnight New York trading session. The stock is down just over 14% for the year so far. In May, Tesla shipped 11,527 vehicles from its Shanghai factory, lower than the 14,174 cars reported for April, the passenger car association data showed. Figures for March weren’t available. Overall sales of pure-electric cars more than doubled from a year ago, rising 186% to 162,000 units in May, the association said. Some in China’s auto industry have cast doubt on the accuracy of the association’s figures. While Tesla’s cars rank among the top 10 new energy vehicles sold in China, the report said local start-ups such as Nio also performed well in May. New energy vehicles include hybrid-powered cars. The report said Volkswagen accounted for nearly half, or 48%, of new energy vehicle sales from mainstream joint ventures with foreign brands.

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Media, Sasfin Wealth

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