MONEY LIVE | Capitec profit to increase by almost 300% to R3.3bn

Capitec profit to increase by almost 300% to R3.3bn

In a trading update for the six months to end-August, Capitec said that its    headline earnings per share will be more than 3 372 cents, representing an increase of at least 500% compared the same period in the previous year.

Its earnings will be more than R3.3 billion, an increase of 292% compared to the R841 million reported in the previous period ended 31 August 2020.

The comparable 6-month period ended 31 August 2020 was severely impacted by the advent of the COVID-19 pandemic and tight lockdown restrictions. 

“Shareholders are cautioned regarding the period up to 31 August 2021 as this trading update is premised on the results of the first quarter of this financial year. The country is experiencing a third wave of the Covid-19 pandemic, there have been significant delays in, and other issues with, the roll out of vaccinations and the economic environment presents a challenge.”  

More specific guidance will be provided when there is certainty of the range of the increase in headline earnings and earnings.

Rand slightly stronger after a big hit on Thursday 

The rand has slightly strengthened after hitting its weakest level against the dollar in a month.

It was last trading at R14.07/$, after weakening to just under R14.14/$ on Thursday. The rand has been hit by a rallying dollar after the US central bank forecast two interest-rate hikes by the end of 2023, which is earlier than many expected. Also, the Fed said that it would scale back bond purchases.

In addition, commodities came under huge pressure this week after the Chinese government stepped in to control spiralling prices.

Reuters reported that the Chinese authorities have announced a plan to release reserves of key metals, including copper and aluminium. Slumping prices for palladium (-11% at one point on Thursday) and platinum (7%) hit the rand hard, as South Africa is a major exporter of both.

On Friday morning, the JSE’s All-Share index continued to weaken after losses earlier this week.

As oil prices came under pressure, Sasol dipped by 4.4% on Friday morning.

But retailers rallied, with Woolworths and the Shoprite Group gaining almost 3%.

On Thursday, April retail sales were released, which increased by 96% from a year before (the height of hard lockdown). On a month-on-month basis, sales grew only 0.8%, compared to the consensus expectation of 1.5%.

US stocks near flat as market digests Fed update

Wall Street stocks hovered near the flat-line early Thursday as investors digested the Federal Reserve's latest policy statement and the unexpected rise in jobless claims last week.

The Fed on Wednesday maintained highly accommodative monetary policy as expected, but several policymakers projected interest rate hikes as soon as 2022 and a majority of central bank officials now believe interest rates will increase in 2023, rather than 2024.

- AFP

Gold drops below $1,800 after Fed takes more hawkish turn

Gold slumped below $1,800 an ounce as the Federal Reserve sped up its expected pace of policy tightening amid optimism about the labour market and heightened concerns over inflation.

The metal slipped to the lowest in six weeks on Thursday as the dollar continued to strengthen, the day after Fed Chair Jerome Powell said the central bank would begin a discussion about scaling back bond purchases. It’s the first major hawkish turn from the central bank whose deluge of stimulus has been critical to bullion’s strong performance since the start of the pandemic.

The central bank also released forecasts that show it anticipates two interest-rate increases by the end of 2023 - sooner than many thought - which helped boost the dollar and U.S. bond yields, hurting gold. Bullion, which declined the most in five months on Wednesday, broke through a number of key technical support levels, including falling below its 100-day moving average.A weakening dollar has supported gold prices since the pandemic began.

- Bloomberg

April retail sales nearly doubles, off low base effects

April retail sales increased 95.8% on a year-on-year basis, this off low base effects given the stringent lockdown regulations in place last year which constrained sales, according to Stats SA.

The main contributors to the increase were the textiles, clothing, footwear and leather goods category, followed by "other" retailers and hardware, paint and glass retailers. General retailers also contributed to the year-on-year increase.

On a month-on-month basis, sales grew 0.8%. The market consensus was for growth of 1.5%.

Investec economist Kamilla Kaplan, in a note issued before the data release, indicated expectations of an improvement in retail sales.

"Consumers' abilities to spend have been restricted by high unemployment, reduced disposable income and relatively tepid rates of unsecured credit extension, but there is evidence now of growing confidence and a lift in overall spend," Kaplan said.

Third wave of Covid-19 infections weigh on trade conditions

Trade conditions dipped slightly in May, this due to expectations of a stronger lockdown for the upcoming third wave of Covid-19 infections, the South African Chamber of Commerce and Industry's (Sacci) Trade Conditions Survey for May shows.

According to the report, the trade activity index dropped 13 points to 36 in May. This is below the 50 neutral mark and implies a negative reading. 

"Business environment uncertainties weighed heavily on almost all elements of trade, namely lower sales volumes and less new orders, disrupted supplier deliveries, and higher sales prices," the report read.

"Less backlogs on orders, improved inventory levels and a smaller rise but still high input costs were some positive developments that respondents reported lately."

The trade expectations index also dropped slightly from 59 in April to 56 in April. Sacci however said expectations for the next six months are still positive.

"The prospects for employment and anticipated higher input costs were the only elements that are seen to weigh negatively on trade conditions in the next six months.

"The greater awareness by government of the business and economic effect of the lockdown process appears to have a less inhibiting effect on trade conditions," Sacci said.

According to respondents, logistic transport problems at harbours and criminal elements targeting deliveries and supplies on some main routes are curtailing trade.

"The strong rand made local manufactured goods less competitive to imported goods, but merchandise export trade is experiencing exceptionally buoyant conditions at present," Sacci noted.

SA mining stocks continue worst losing streak since February 2018

South African stocks retreated, tracking declines in emerging-market peers as the U.S. Federal Reserve’s hawkish turn hurt appetite for riskier assets. Major miners were a big drag on the benchmark equity index as a stronger dollar hit metals prices.

The FTSE/JSE Africa All Share Index slipped 0.7% as of 9:24 a.m. in Johannesburg, falling for a second day as trading resumed after Wednesday’s public holiday. An MSCI gauge of Asian shares was on track for its biggest slide in a month after Fed Chair Jerome Powell said officials would begin a discussion about scaling back bond purchases.

Fed policy makers also disclosed that two interest hikes are likely by the end of 2023, sooner than many thought.

Locally, investors are awaiting retail sales data for April and assessing the impact of tighter restrictions aimed at countering soaring Covid-19 infection rates. President Cyril Ramaphosa on Tuesday extended a night-time curfew, reduced the permitted attendance at public gatherings and restricted alcohol sales as he moved the country to the third level of a five-stage virus-alert system.

Anglo American dropped 2%, to cause the largest drag on the benchmark gauge, and BHP Group fell 1.1% as an index of industrial-metals miners slid 1.5%, declining for a third session.

A gauge of precious-metals producers dropped 2.8%, falling for an eighth day in the worst losing streak since February 2018, after gold capped the biggest drop in five months.

Gold Fields slumped 5.5%, AngloGold Ashanti Ltd. dropped 3.1% and Harmony Gold Mining Co. fell 3.5%. Impala Platinum Holdings Ltd. tumbled 2.4% and Sibanye Stillwater Ltd. dropped 2.3%.

Banks were dragged lower by the risk-off sentiment, with a sector index slipping 0.5%. FirstRand Ltd. dropped 0.6% and Standard Bank Group Ltd. fell 0.9%.

While fewer than 30 of the benchmark index’s 139 members were higher in early trade, the market’s decline was curbed by strength in local heavyweight Naspers Ltd., which gained 0.4%, while its Prosus NV unit added 0.4%.

Foreign investors have continued a recent spate of selling South African equities, disposing of a net R601 million of local stocks on Tuesday, according to exchange operator JSE, marking an eighth day of outflows.

- Bloomberg

US markets worried about inflation - again

Wall Street stocks dipped early Tuesday following another troublesome inflation report just ahead of a two-day Federal Reserve meeting.

Producer prices for the past year spiked to 6.6 percent in May, the highest in the history of the data set dating back to 2010, the US Labour Department said.

The new data were released on the first day of the Fed's policy meeting, and will ramp up pressure on central bankers to pay more attention to inflation in the world's largest economy.

The Fed is widely expected to maintain its current accommodative posture, arguing that recent price increases will prove ephemeral.

UK, Australia agree post-Brexit free trade deal

Britain announced Tuesday a major free trade agreement with Australia as London presses on with efforts to strike new deals with nations since leaving the European Union.

It follows similar UK trade deals reached with Japan and the European Union following London's divorce with Brussels.

Prime Minister Boris Johnson said the latest agreement "marks a new dawn in the UK's relationship with Australia, underpinned by... shared history and common values"."This is global Britain at its best - looking outwards and striking deals that deepen our alliances and help ensure every part of the country builds back better from the pandemic," he added in a statement.

Foreign Secretary Dominic Raab said on Twitter that the deal is "an important stepping stone" in efforts to join a massive free trade zone in the Indo-Pacific region - the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

The UK government added that the deal eliminates tariffs on all British goods "in the first major trade deal negotiated from scratch" since the country left the EU.

A final "agreement in principle" will be published in the coming days, it added.

The UK-Australia trade relationship was worth R270 billion last year and is set to grow under the deal, the statement said.Swimwear and whisky The two countries plan to "intensify cooperation on security, climate change and science and tech", the UK government said.

The deal eliminates tariffs on imported Australian goods such as wine, swimwear and confectionery, it said.

Going the other way, British products including cars, Scotch whisky, biscuits and ceramics will be cheaper to sell into Australia.

It comes after the two nations addressed issues surrounding the farming sector. British farmers will be protected by a cap on tariff-free imports for 15 years, using tariff rate quotas and other safeguards.

- AFP

SA stocks struggle for direction as copper slump drags miners

South African stocks were little changed Tuesday, struggling for direction as a downturn in copper prices dragged on diversified miners, and falling crude oil prices depressed Sasol.

The FTSE/JSE Africa All Share Index declined less than 0.1% at 9:35 a.m. in Johannesburg, ahead of a market holiday on Wednesday.

Commodities retreated. Like Asian peers, South Africa stocks were mixed ahead of Wednesday’s key Federal Reserve meeting. Investors are awaiting clues about a timetable for scaling back emergency monetary stimulus after a pullback in bond yields eased tapering concerns.

Anglo American Plc dropped 1.7% to provide the biggest drag to the index, and pulling the gauge for industrial miners down 0.7%. Copper prices fell to the lowest in seven weeks amid a decline in base metals on concern about possible tightening of monetary policy in the U.S. and as Chinese demand pulled back after a recent rally in prices.

Market heavyweight Sasol Ltd. fell 1.6% as crude oil prices retreated, with investors weighing the outlook for rising demand against extended anti-virus curbs in some economies.

Richemont advanced for a second consecutive day, up 0.4% to provide the biggest boost to the benchmark index, after news that the company was in exclusive talks to acquire Belgium’s Delvaux.

Foreigners were net sellers of South African equities Monday, disposing of R400 million worth of shares, according to exchange operator JSE.

Nasdaq, S&P 500 end at records as tech shares gain

Resurgent technology shares led US stock indices to fresh records Monday, outperforming industrial names ahead of key economic releases and a Federal Reserve announcement later in the week.

The tech-rich Nasdaq Composite Index jumped 0.7 percent to finish at 14,174.14, while the S&P 500 gained 0.2 percent to 4,255.15, both scoring new records.

But the Dow Jones Industrial Average slipped 0.3 percent to 34,393.75.

The first session of the week reflected the latest pivot after a stretch earlier in the year when tech shares lagged other sectors such as financial companies and manufacturers.

Investors now appear to be taking profits on some of those bets, and steering funds back into large tech names, which outperformed other sectors earlier in the pandemic. Apple, Facebook and Netflix all gained at least one percent.

This week's calendar is dominated by the Federal Reserve's two-day policy meeting, which is expected to show central bankers raising their inflation forecasts.

The Fed is expected to maintain the current policy of accommodation, but central bank chief Jerome Powell will face myriad questions about prices during a news conference.

Powell on Wednesday could offer more assurances that the Fed will be vigilant about price pressures and stress that it has tools to combat inflation.

- AFP

Tokyo stocks close higher on tech rallies

Tokyo stocks closed higher on Tuesday as high-tech shares rallied following a record close on the Nasdaq, with investors focusing on the Fed meeting this week.

The benchmark Nikkei 225 index rose 0.96 percent, or 279.50 points, to 29,441.30, while the broader Topix index advanced 0.80 percent, or 15.73 points, to 1,975.48.

"High-tech shares were particularly strong following gains on the Nasdaq," said Daiwa Securities chief technical analyst Eiji Kinouchi."Investors were also encouraged by the recent acceleration of vaccinations in Japan," Kinouchi told AFP.

Building confidence climbs to its highest level since 2018, given low base effects

The FNB/BER Building Confidence Index has climbed 12 points to 39 for the second quarter of 2021. This is the highest level since the first quarter of 2018. 

However, more than 60% of respondents are dissatisfied with business conditions.

Gains in confidence has mainly been driven by building material manufacturers and hardware retailers. "In contrast, the confidence of what can be considered the mainstream building sector is still very depressed," said Siphamandla Mkhwanazi, Property economist at FNB.

Excluding building material manufacturers and hardware retailers, confidence levels would be around a low of 25 points.

Mkhwanazi highlighted that the improvement in activity is also attributed to the extremely low base effects recorded last year.

Profitability remained weak. "Internationally we've seen building input prices rise dramatically over the past few months as global demand far outstrips supply. At the same time, domestic building demand remains too weak for contractors to fully pass these prices on to clients. As such, some contractors have had to resort to 'suicide pricing' to secure contracts," said Mkhwanazi.

"As things stand, we are set to see the building sector once again far underperform the rest of the economy this year," he added.

Alexander Forbes to sell its life insurance business to Sanlam for R100m

Alexander Forbes is selling its life insurance business to Sanlam.

The two companies published statements on Monday announcing that they have entered into an agreement that will see Sanlam acquire Alexander Forbes's group risk and retail life insurance businesses for R100 million.

The transaction is still subject to certain conditions and the approval of competition authorities. Alexander Forbes has been in the process of exiting the insurance space for some time. It sold its short-term insurance business to Momentum Metropolitan holdings at the beginning of 2020. At the time, the company also said that it was looking to sell its life insurance operations too and focus on retirement administration and providing advice.

"This disposal is the final step in our move away from providing insurance underwriting and reaffirms Alexander Forbes' strength as a trusted adviser to our clients," said Alexander Forbes CEO, Dawie de Villiers.

He added that the disposal concludes the exit of its insurance businesses and will realise a lot of value for shareholder and clients while protecting the employees employed in that business. "Sanlam understands the importance of delivering financial well-being, and I am confident that the clients and employees moving across in this process are in good hands," said De Villiers, who also joined Alexander Forbes from Sanlam.

Sanlam said this transaction will help it with its South African growth strategy by strengthening the insurer's position in the group risk and retail life insurance markets.  

-Londiwe Buthelezi

European stocks climb at open

European stock markets rose solidly at the open Monday, with traders awaiting this week's Federal Reserve meeting for clues on the outlook for interest rates.

London's benchmark FTSE 100 index won 0.5 percent to 7,171.82 points, with the UK government set to delay the lifting of further coronavirus restrictions.

In the eurozone, Frankfurt's DAX 30 index gained 0.5 percent to 15,766.87 points and the Paris CAC 40 advanced 0.5 percent to 6,632.76, as markets assessed also the weekend G7 meeting.

- AFP

Sasol finalises sale of Secunda air separation business

On Monday, Sasol confirmed that it completed the sale of its Secunda air separation business to Air Liquide after the deal received approval from the Competition Tribunal earlier this month.

The Tribunal placed several conditions on the approval, including the joint procurement of renewable power of up to 900 megawatts and decarbonisation investments by Air Liquide, as well as a commitment to preserving jobs and support to local small enterprises.

Sasol in July 2020 said it had entered into an agreement to sell 16 air separation units located in Secunda to the French multinational supplier of industrial gases, Air Liquide Large Industries South Africa, for R8.5 billion.

Sasol said it would use part of the proceeds to repay some of its debt burden of more than R120 billion. Sasol has been selling some of its assets to help settle its debt, and recently announced that it would also sell a 30% stake in a natural gas pipeline running from Mozambique to South Africa for as much as R5.1 billion.