Weekly Market Insights 4 – 8 October 2021

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Local

Reactions to local data were mixed this week. Labour market data disappointed, while trade balance data impressed.

The Quarterly Employment Statistics (QES) report released by Statistics South Africa (Stats SA) showed that total employment declined by 0.9% quarter-on-quarter. The decline in employment this quarter was led by community services, manufacturing and construction. However, employment in the mining and transport sectors increased marginally.

Trade balance data from the South African Reserve Bank (SARB) showed that the surplus widened more than expected to R42.4 billion in August 2021, while the previous month’s figure (July) was also revised upwards. Exports increased by 9.7%, mainly supported by precious metals and inventories as well as base metals. Imports rose 8% during the period.

International

It was a risk-averse week, as evidenced by a sharp rise in the fear/volatility index.

In the U.S., concerns about a government shutdown have been contained as the House and Senate voted in favour of a stopgap measure to prevent a disruption in Federal Reserve funding. The bill, an interim measure, was signed into law by President Joe Biden just before midnight.

Efforts to push the Senate-passed $1.5 billion infrastructure bill through the House, however, have been less successful. The vote, originally scheduled for the week ending October 1, was postponed by the Speaker of the House of Representatives as internal disagreements among Democrats emerged.

In China, the Evergrande debt debacle is compounded by ongoing power outages due to a coal shortage in the region. The outages threaten the economy and productivity in China as the country heads into the winter months. Demand for electricity has risen as economic activity has increased.

The Rand

A stronger dollar pressured emerging market currencies, including ZAR, for much of last week. The initial ZAR depreciation, particularly against the dollar, was exaggerated following the release of quarterly employment statistics (QES) by Stats SA. However, the domestic currency rebounded in the second half of the week, reversing its gains after the SARB released a much better-than-expected trade balance.

Commodities

It has been a mixed week for commodity prices which have had to digest a plethora of catalysts from the world’s two largest economies namely the US and China. These catalysts include delayed infrastructure plans, inflation and tapering concerns, power outages and a generally stronger dollar.

Coal prices have led gains in the energy sector on continued demand side assumptions out of China, who look to keep the lights on in key provinces affected by power outages. The move in energy has helped buoy oil prices as well, although gains have been tempered as we lead into the new week’s OPEC (Organisation of Petroleum Exporting Countries) meetings. The suggestions are that OPEC is looking to increase production levels further amidst what has been increasing demand.

Gold has managed to gain despite recent dollar strength on the back of global inflationary concerns.

Iron ore has started to rebound from severely oversold levels although emission controls and production limits by Chinese authorities threaten to cap gains.

Copper often considered a leading indicator of economic health has declined in the week’s economic uncertainty.

Companies

Capitec Bank Holdings Ltd: reported HEPS for the interim period to have increased by 513% from the prior year’s comparative period.

Northam Platinum Ltd: FY21 results showed revenue to have increased to R32.63bn from R17.81bn in the previous year.

Pick n Pay Stores Ltd: expects EPS for the interim period to be between 80.0% and 90.0% higher than the prior year’s comparative period.

Grand Parade Investments Ltd: FY21 results showed the diluted loss per share to have improved by 76.7% from the prior year.

Ascendis Health Ltd: FY21 results showed the diluted loss per share to have increased to 226.50c, from 202.30c in the previous year.

Barloworld Limited: in a trading update for the 11 months to 31 August 2021, has guided revenue to have increased by 1.9%.

PPC Ltd: has signed non-binding term sheets with the SA lenders to refinance its existing debt obligations and remove the undertaking for a capital raise subject to the completion of the disposal of PPC Lime by 31 October 2021.

PSG Konsult Limited: expects HEPS for the interim period to have increased to be between 30.40c and 30.80c, as compared with 24.20c, in the prior year’s corresponding period.

Arrowhead Properties Limited: proposed that the company will acquire Fairvest.