Daily Report 24 May 2023

SA Company News:

The Johannesburg Stock Exchange All-Share Index closed 1.6% lower at the 76 748 level. British American Tobacco major shareholders are calling for the new Chief Executive Tadeu Marroco to restart share buyback programs in order to boost the group’s share price and speed up the return of capital to shareholders.

Coronation Fund Managers reported for the six months ended 31 March. The company said profit attributable to equity holders was R22 million, compared with R697 million a year ago. Headline earnings per share fell to 6.2 cents for the period, down from 199.1 cents during the comparative interim period. In its results presentation the company said the impact of the total obligation payable to SARS amounted to R716 million for additional taxes linked to its Irish operations. Coronation will not be paying an interim dividend.

Datatec was up 6% after posting higher profit and revenue for the year ended 28 February. Profit attributable to shareholders was $80.3 million, compared with $33.9 million a year ago. The information and communications technology group’s board also declared a higher dividend of R1.95 per share. AngloGold Ashanti fell more than 3%. Fitch said in a note that it expects the miner’s plans to move its corporate domicile to the UK and to pursue a primary listing in the US will be credit neutral to the groups credit profile.

SA Economy:

The composite leading business cycle indicator dropped 2% in March 2023, marking the 4th consecutive month of contraction in the country’s economic activity and much faster than in the prior month. Investors are pricing in another 50 basis points hike by the South African Reserve Bank (SARB) as the Monetary Policy Committee (MPC) will announce its decision tomorrow. This would be the 10th consecutive increase since the start of 2022. If the MPC hikes rates by 50 basis points, the SARB’s benchmark lending rate will increase from 7.75% to 8.25%, which will also push up the prime lending rate from 11.25% to 11.75% per annum. Headline consumer inflation for April is due out later today.

Global Economy:

The UK recorded a budget deficit of 25.56 billion pounds in April, while economists surveyed by Reuters expected 19.75 billion pounds. Worries linked to the UK debt are adding to the worries related to the US debt, as interest rates rise. U.K. inflation in at 8.7% year-on-year, down from 10.1% in March, but above a consensus estimate of 8.2% The debt ceiling seems to be the only market driver at the moment, if no agreement is reached, the U.S. could default on interest it owes on its debts, sending borrowing costs soaring and sending shockwaves through the global economy.

Global Company:

The FTSE 100 closed 0.1% lower at 7 762. Asian markets are trading lower, pressured by a weak session on Wall Street overnight amid the impasse in the US debt-ceiling talks. The Hang Seng Index is lower by 1.2% to 19 195. In China, the Shanghai Composite is down 0.77% to 3 221. The Dow Jones Industrial Average closed 0.7% lower to 33 055, while the S&P 500 was down 1.13% to 4 145. AutoZone shares was lower by 6% after the auto retailer missed revenue expectations. BJ’s Wholesale shares also fell 7.2% on disappointing quarterly revenue.

Commodities:

Gold is down 0.12% to $1 972/oz, while Platinum is lower by 1.86% to $1 060/oz. Brent crude was 1.11% higher at $76.84 a barrel.

Currencies:

The rand traded at R19.19 against the US Dollar, R23.84 against British Pound and R20.69 against the Euro. The Euro is slightly weaker against the US Dollar to trade at $1.0784.