Taking Stock - The JSE saw broad-based falls on Monday.

In todays taking stock, we discuss how the JSE saw broad-based falls on Monday for companies including miners and banks.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

The Johannesburg Stock Exchange saw broad-based falls on Monday for companies including miners and banks while several big overseas markets were closed for public holidays. The All-share index closed down 0.52% to close at 66,586, and the blue-chip Top-40 index ended down 0.53%. Investor attention will soon turn to a scheduled review of South Africa's sovereign credit by Moody's on Friday. The rating agency already has the country's debt in "junk" status, and the question is whether it will cut that rating further still. A survey also showed South Africa's manufacturing activity grew less quickly in April, but it did little to affect the rand.

 

 

EUROPEAN MARKET COMMENTARY

European stocks rose on Monday on the first trading day of May, with the UK closed for a public holiday. German retail sales posted their biggest year-on-year increase in March since the start of the Covid pandemic. Lufthansa shares climbed 2.6%, after the German carrier said it will offer flights to more than 100 holiday destinations. Meanwhile, shares of Siemens Healthineers rose 1.9% after the German health technology company raised its full-year sales and profit forecast on Monday.

 

 

US MARKET COMMENTARY

US stocks climbed on Monday, the first trading day of May, as shares tied to the economic reopening rallied on relaxed pandemic restrictions. Bets on the economic reopening led the market advance, especially retailers. The rally in these stocks came after New York Governor Andrew Cuomo announced that most capacity restrictions will be lifted across New York, New Jersey and Connecticut, while 24-hour subway service will resume in New York City later this month.

 

 

ASIAN MARKET COMMENTARY

Stocks in Asia-Pacific were mixed this morning with major markets in Japan and China still closed for holidays. Official data released today showed Australia’s trade surplus narrowing in March. The seasonally adjusted trade surplus for March came in at 5.574 billion Australian dollars (about $4.31 billion), according to the Australian Bureau of Statistics. That was a more than 2 billion Australian dollar decline from February.

 

 

 

CURRENCY MARKET COMMENTARY

The rand gained on Monday, helped by the US dollar falling as Treasury yields retreated and economic data disappointed. The rand was 0.59% stronger versus the dollar, as it closed out the session at R14.39. The dollar was down 0.3% against a basket of currencies, after data showed US manufacturing activity grew at a slower pace in April and construction spending rebounded far less than expected in March.

 

 

COMMODITIES MARKET COMMENTARY

Gold prices edged lower this morning, after hitting a more than two-month high in the previous session, as a stronger dollar and optimistic comments from US Federal Reserve Chairman Jerome Powell on the economy weighed on the metal’s safe-haven appeal. Oil prices added to overnight gains today, buoyed as more US states eased lockdowns and the European Union sought to attract more travellers, which would help offset weakened fuel demand in India as COVID-19 cases soar.

LOCAL COMPANIES

Sanlam (SLM) -1.2%

Insurance group Sanlam has increased its stake in Morocco’s Saham to about 85%. This happened despite the Casablanca-based group’s Lebanon business being written down to zero following the massive explosion in Beirut last August. Sanlam initially bought its 61.7% stake in Saham for R5.7 billion in 2018, as part of its African expansion strategy. Its latest move now sees its subsidiary, SAN JV, acquiring a further 22.8% in Saham for about R2 billion. “Morocco and the broader North and West Africa regions remain key markets for Sanlam and this proposed transaction is in line with our African diversity strategy,” said Sanlam Emerging Market CEO Heinie Wert. In November, Sanlam said despite the setback in Lebanon it remained committed to its expansion across the continent. “Saham Finances brought a complementary footprint and has expanded our continental business presence and given us particularly strong property and casualty insurance businesses in a number of African countries outside South Africa,” said Sanlam Group CEO Paul Hanratty at the time. Sanlam is acquiring the holding from Said Alj and two entities related to him, Sanam and First Commercial Estate Company SARL. The latest transaction will enable Sanlam “to deepen its direct presence in North and Francophone West Africa” as part of its strategy to optimise the Pan-Africa portfolio and strengthen its position in core markets. It will also enable it to “explore broad partnerships in the long-term that will further support growth in the region”. This latest deal also allows Alj to exit the business. Alj will, however, continue to chair Sanam.

 

 

PPC (PPC) +9.7%

JSE-listed cement and lime producer PPC has made further significant progress with its capital restructuring by reaching an agreement to sell its wholly-owned lime business to investor consortium Kgatelopele Lime for R515 million. In terms of the agreement, the rights, benefits and advantages of PPC Lime transfer to Kgatelopele Lime on April 1, with the divestment expected to reach a close by the end of the year. The transaction is still subject to a number of conditions precedent, including approval by the Department of Mineral Resources and Energy and the Competition Commission. The divestment forms part of PPC’s ongoing capital restructuring, and the effective net proceeds of about R500 million will be used to degear PPC’s South African balance sheet. The divestment is likely to have an impact on any decisions taken by PPC and its bankers about the planned equity raise of at least R750 million.

INTERNATIONAL COMPANIES

Apple (APPL) +0.8%

Epic Games argued that Apple purposely locks in its customers in the first day of a landmark trial with Apple over the rules of the App Store. Epic is looking to force Apple to open up iPhone software distribution so it could use its own payment processor, bypassing Apple’s customary 30% fee on digital goods. A favourable ruling could even allow Epic to offer its own app store for iPhones. Apple is arguing that it built the App Store and gets to set the rules, which are designed to ensure that apps are high quality and secure. “Epic wants us to be Android, but we don’t want to be. And our consumers don’t want that either. They want the choice,” Apple lawyer Karen Dunn said. Epic’s argument is that Apple’s App Store is anti-competitive, and that its arguments about quality and security are essentially an excuse to exclude competitors like Epic Games’ title Fortnite, which was booted from Apple’s store last year after it introduced a direct payment mechanism. On Monday, Apple’s and Epic’s lawyers both made their opening statements, and Epic Games founder and CEO Tim Sweeney testified. The trial is expected to last three weeks.

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