Daily Report 27 January 2023

SA Company News:

The Johannesburg Stock Exchange All-Share Index closed 1% higher at the 80 509 level, mainly supported by tech stocks and mining shares.

Sasol said that they are teaming up with an Algerian state energy company, Sonatrach on a project in Sicily to produce “low carbon” hydrogen and synthetic natural gas (syngas) as well as to capture and reuse CO2. Both have plants in Sicily and did not mention any financial details in their statement.

Consumer goods group AVI Ltd. said that the company expects headline earnings per share to increase by 1% to end-December. The impact of load shedding was mitigated through back-up power that added around R22 million to direct operating costs.

Major mining companies such as Anglo American Platinum, Sibanye-Stillwater and Implats said that they are finding it increasingly harder and more expensive to run deep and ageing shafts due to the intensive power cuts.

In a trading update from the Lewis Group for the nine months ended December 2022, the company said that merchandise sales increased by 2.0% year-on-year, cash sales fell by 13.5% and credit sales increased by 16.8%, reflecting the mounting pressure on consumer’s disposable income.

 

SA Economy:

The annual Producer Price Inflation (PPI) eased for the fifth straight month to 13.5% in December 2022, down from 15% in November and slightly below market estimates of 14.05%.

Mineral Resources and Energy Minister Gwede Mantashe said that cutting the proposed contract periods with Karpowership from 20 years to 10 years could help government realise its ambitions to procure energy urgently from the floating power stations. Karpowership is a Turkish company that provides ship-mounted gas power plants and were awarded three projects under government’s 2021 emergency power procurement programme to award around 2 000MW, but these projects have been unable to reach financial close as the projects are faced with a raft of lawsuits and administrative challenges.

According to data compiled by the SA Canegrowers Association, the sugar industry is set to lose more than R700m in 2023 due to load-shedding. SA Canegrowers chair, Andrew Russell said that load-shedding affects 1 135 irrigated growers that employs more than 10 000 workers.

The South African Reserve Bank raised its main lending rate by 25 basis points to 7.25%, the prime lending rate has increased to 10.75%. Economists was expecting a 50 bps increase.

 

Global Economy:

China’s tourism sector has recovered to pre-pandemic levels with travelers venturing out during the Lunar New Year holidays after stringent Covid-19 restrictions were removed according to local industry data.

U.S. Gross Domestic Product (GDP) rose 2.9% in the fourth quarter, more than expected. Economists expected of growth to decelerated to 2.6% from 3.2% in the prior three-month period.

Hong Kong’s 2022 trade gap rose to $400 billion from $347 billion a year before, with exports falling faster than imports.

The Baltic Dry index, which measures the cost of shipping goods worldwide, is now down for the eighth day in a row to 677 points.

 

Global Company:

The FTSE 100 closed 0.21% higher at 7 761.

Shares in Diageo PLC fell by more than 4% after the U.K.-based drinks maker’s results pointed to a slowdown in operating profit in its North American division.

The Hang Seng Index is higher by 0.16% to 22 597.

In China, the Shanghai Composite is closed.

The Dow Jones Industrial Average closed 0.61% higher to 33 949, while the S&P 500 was up 1.09% to 4 060, led higher by energy, consumer discretionary and technology shares.

IBM shares fell 4.5% after the company announced that they would be cutting jobs.

Tesla closed 10% higher after the company reported better than expected fourth-quarter revenue and earnings.

 

Commodities:

Gold is down 0.63% to $1 929/oz, while Platinum is lower by 2.31% to $1 013/oz.

Brent crude was 1.54% lower at $87.47 a barrel.

 

Currencies:

The rand traded at R17.23 against the US Dollar, R21.33 against British Pound and R18.73 against the Euro.

The Euro is slightly weaker against the US Dollar to trade at $1.0872.