JSE Direct with Simon Brown
October Inflation
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Market Overview
Crypto Surge, Gold Decline: Bitcoin rallies as investors shift from gold to crypto. Gold hit a recent high of $2,800 but is now pulling back, possibly towards $2,300-$2,400. Central banks continue to buy gold as a hedge against U.S. dollar dominance and geopolitical risks.
[caption id="attachment_43623" align="aligncenter" width="849"] Gold | Weekly | 13 November 2024
Rand Weakness: The ZAR weakened above 18 to the dollar, driven by strong U.S. dollar demand amidst market volatility. South African Rand overshoots due to its high liquidity, making it vulnerable to sharp moves.
Trump's Impact on CryptoMarket speculation suggests Trump may be crypto-friendly, unlike the current SEC chair Gary Gensler, known for his strict regulatory stance. Potential shifts in the regulatory landscape could benefit cryptocurrencies, particularly Bitcoin.
Simon holds Bitcoin and advises caution: ensure crypto is stored in a hardware wallet for safety.
Bitcoin | Weekly | 13 November 2024
Local Telco Sector: Vodacom & MTNBoth companies struggle with weakened African currencies like the Ethiopian Birr and Egyptian Pound. Profits are impacted when converted back to ZAR.
Despite attractive dividend yields (MTN ~4%, Vodacom ~5.6%), Simon remains bearish, highlighting high capex demands and sector challenges.
Raubex: Construction Sector Bright SpotStrong results from Raubex, showing resilience in a struggling sector. Diversification into renewable energy and mining operations boosts performance.
Simon notes it as one of the few quality construction plays left, alongside Afrimat.
Consumer Market StrugglesUpdates from AVI and BidCorp indicate persistent weak consumer demand, despite optimism from a possible government of national unity. Inflation has eased, but consumer spending remains subdued as households repair balance sheets.
Retail updates show mixed results: Truworths reported disappointing numbers, while The Foschini Group* performed better.
Tencent ResultsTencent posted strong results, though it did not significantly boost Naspers or Prosus stock prices. The market reaction was muted despite the solid performance.
Final ThoughtsThe market remains volatile, with significant moves in crypto, gold, and the Rand. Simon advises a cautious approach, with a focus on quality stocks and long-term plays.
Remember: be kind and look out for others. Kindness is rule number one.
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00:00 Market Overview: Crypto vs Gold 02:50 The Trump Effect on Gold and Crypto 06:01 The Future of the Rand and Emerging Markets 08:55 Sector Analysis: Vodacom, MTN, and Raubex 16:02 Consumer Trends and Company Updates
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Episode Summary: Simon Brown dives into the week’s biggest financial and economic stories, covering Trump’s election win, Nvidia's inclusion in the Dow, rate cuts expected from the FOMC and BOE, and the latest updates on Murray & Roberts, palladium, and gold. Recorded after market open, this episode sheds light on key trades, trends, and the shifting global landscape.
Trump's Victory – What’s the Trade?Nvidia | Weekly chart | Close 06 Nov 24
Murray & Roberts UpdateGold | Weekly chart | 07 Nov 24
Bank Rate Cuts – FOMC & BOEListener Takeaway: Markets remain unpredictable but resilient, with global relations, tech policies, and central bank strategies driving shifts. Simon emphasizes informed trading and the long view in these uncertain times.
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Disclaimers: The JSE Direct podcast is independent of JSE Limited and reflects Simon Brown’s views, not necessarily those of the JSE. Always consider risks when investing.
Local Inflation Update
Important titbit about today's SA headline CPI print. It meant that CPI rose by 4.3% y/y in Q3 2024. In Sept, SARB expected 4.4% for Q3, implying Sept print largely in line with their expectations. Therefore, today's number will not change SARB's thinking. Folks should calm down.
— Hugo Pienaar (@hugopien) October 23, 2024
Currency Markets
Chapters
00:00 Local Inflation and Economic Outlook 06:01 Using AI for Investment Analysis 12:06 Famous Brands Results Analysis 18:05 Comparative Analysis with SPUR
Strong Retail Sales and the Two-Pot System:
South African retail sales | YonY
Tribute to Tito Mboweni:Johnson & Johnson quarterly dividend payments
Bytes Technology Group and Investment Opportunity:00:00 Retail Sales Recovery and Economic Outlook 04:29 Tribute to Tito Mboweni 08:32 Johnson & Johnson: A Steady Investment 09:52 Bytes Technology Group: Market Reactions 12:32 Quilter's Strong Performance 14:29 Cecil's Ongoing Struggles 15:56 Brent Oil Prices and Global Economy 17:48 Volatility of the Rand and Market Predictions
Overview:
In this episode of JSE Direct, Simon Brown breaks down the latest market updates, key stock analyses, and insights into the South African investment landscape. Episode highlights include discussions on property developers Calgro M3 and Balwin, Capitec’s strong performance, Purple Group’s rise, Afrimat’s challenging update, and Wilson Bailey’s long-term chart breakout. The show also covers upcoming events and Brown's views on Nvidia’s stock movement.
Property Developers: Calgro M3* vs. BalwinCalgro M3 weekly chart | Close 09 October 2024
Capitec: Expensive, but ResilientA breakout after a 17-year consolidation is very bullish in TA. Add the fundamental underpin. I think this still has lots of room to run. pic.twitter.com/fBk5BCKtvk
— Richard Thomason (@richytee) October 9, 2024
Nvidia: Breaking New Highs
Nvidia weekly chart | Close 09 October 2024
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Chapters 00:00 Market Overview and Calgro M3 vs Balwin 07:11 Capitec's Performance and Future Outlook 12:43 Exploring Other Stocks: Purple Group and Afrimat 18:15 Long-term Trends: Wilson Bailey and Nvidia
China's Market Rebound
Stimulus Measures: The Chinese government has initiated a stimulus, which includes cutting reserve requirements and lowering interest rates. While spending has not picked up fully, the China 50 ETF (in US dollars) has wiped out losses dating back to July 2022. Hong Kong’s Hang Seng index shows a similar trend.
Market Sentiment: Short squeezes have played a role in pushing the prices of big Chinese companies like Alibaba and Tencent higher. Despite concerns about China's long-term investability (raised by experts like Viv Govender of Rand Swiss), Simon remains optimistic about continued growth in the medium term.
Shift in Hot Money: There's been a notable shift away from tech stocks like Apple and Nvidia, with more capital flowing towards China in recent days. Simon discusses the potential for short-term pullbacks, but he sees this as an opportunity.
South African ETFs PerformanceTop Performers: Property ETFs have outperformed, with the CSPROP, Satrix Property, and 1nvest Property ETFs gaining between 30% and 31.7% over nine months ending in September 2023.
Underperformers: ETFs linked to palladium, platinum, and tech innovation (e.g., Sygnia’s Fourth Industrial Revolution ETF and Satrix Healthcare Innovation ETF) have shown negative returns.
Outlook for South African REITsSimon expects further growth in the property sector but at a more moderate pace than this year’s 30% returns. He highlights the potential impact of upcoming interest rate cuts, consumer spending at malls, and the demand for yield as government bond rates decrease. Some REITs, particularly those in rural and township retail spaces, are performing exceptionally well.
The market tends to move ahead of the cuts based on expectations, but technically any cut is great for cheaper debt and more consumer spending at the underlying properties, plus a lower rate for the valuations which means a higher present value. So yes, they can keep going.
— The Finance Ghost (@FinanceGhost) October 2, 2024
The South African Rand and Global Markets
The Rand has seen fluctuations, dipping to as low as 17.02 against the US dollar and facing pressures from global events such as the Iranian attack on Israel and rising oil prices. Simon expects the Rand to strengthen and potentially break below 17, possibly reaching levels as low as 14.
Oil Prices: OPEC is grappling with maintaining production discipline. Oil prices are likely to hover around $70 per barrel, which is positive news for South African consumers in terms of petrol prices. South African PMI and Vehicle Sales
PMI: South Africa’s PMI for September was positive, indicating slight economic expansion. The absence of load shedding and lower interest rates have contributed to the improved outlook.
Vehicle Sales: September saw better-than-average vehicle sales (44,000 units). Simon emphasizes the potential upside in companies like Combined Motor Holdings (CMH), which has started to perform after years of stagnation. Investment Strategy in a Bull Market
Simon reiterates his bullish stance, noting that while there will be pullbacks (up to 10% corrections), the overall trend remains upward. He advises staying long in the market, especially in a bull phase.
Summary: In this episode of JSE Direct, Simon Brown delves into the latest developments in South African markets, focusing on the impact of China's major economic stimulus and the strengthening of the Rand. Key highlights include:
Rand Strength: The Rand has seen notable appreciation, reaching levels of R17.12 to the US dollar. Simon discusses the drivers behind this, particularly US dollar weakness and foreign purchases of South African bonds. He explores possible future movements, with a target of R16.80 and potential for further strengthening.
Global Stimulus: China's massive stimulus measures, including relaxed lending rules for banks and lower interest rates, are aimed at boosting consumer demand. This is the largest Chinese stimulus since 2008, with significant potential to impact global commodities and bolster the South African economy.
Commodities & Bull Market: The commodities market is seeing positive movement, with Chinese demand driving up prices for industrial metals like copper, iron ore, and coal. Simon notes how the previous commodity bull run in 2021 significantly strengthened the Rand and discusses the potential for a similar scenario if China's economy continues to gain momentum.
Market Performance: South Africa is outperforming other emerging markets, particularly Brazil and Mexico, over the past six months. Simon explains the drivers of this outperformance and highlights the continuing bull run in the JSE Top 40 and All-Share indices.
SA Equities: Our fortunes have changed significantly since the GNU was formed in June. SA has dramatically outperformed (in US$) not only Emerging markets in general, but Brazil & Mexico. SA has tilted more centrist, with a focus on the economy. Brazil & Mexico both shifted left. pic.twitter.com/Zz6OOM4dCJ
— Karin Richards (@Richards_Karin) September 23, 2024
Rate Cuts: South Africa and several other global economies, including the US and Europe, have entered a rate-cutting cycle. Simon emphasises the importance of this for markets, especially property stocks, which are benefiting from lower bond yields and improved investor sentiment.
JSE Index Changes: Anglo Platinum has been removed from the JSE Top 40 index, replaced by Pepkor. Simon discusses why Pepkor’s entry is significant, given its position as a retailer and its attractive valuation compared to competitors.
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Episode Overview:
In this episode, Simon Brown dives into the current economic landscape with a focus on interest rates, inflation, and the state of the South African Rand (ZAR). He also explores asset-light businesses and why they make great investments, followed by a breakdown of the latest market activity and local company results.
Rate Cuts & Inflation Outlook:SA Prime and CPI September 2024
ZAR Strength & Market Trends:Palladium weekly chart | 18 September 2024
Asset-Light Businesses & Their Investment Potential:"Rate cuts are coming, and I think we'll see a short-term sell-off as markets react." "Asset-light businesses like Santova and Shein are great investment opportunities because they don't carry the heavy burden of owning physical assets." "Outsurance continues to impress with strong numbers and dividends, proving the strength of short-term insurers."
Chapters 00:00 Economic Landscape and Rate Decisions 03:09 Understanding Asset-Light Businesses 05:54 Market Psychology and Upcoming Events 09:11 Local Results and Investment Insights 11:52 Exploring New Investment Opportunities 15:10 Finbond and Market Speculations 17:59 Larry Ellison and Oracle's Rise
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Summary
In this episode of JSE Direct, Simon Brown discusses various topics including the troubles faced by Anglo Platinum, the performance of leisure stocks, Anglo Gold Ashanti's* acquisition of an Egyptian gold miner, and the impact of two pot withdrawals. He also touches on the future of PGMs, the growth of electric vehicles, and the psychology of markets.
Takeaways"Anglo Platinum has a problem which is perhaps a little more unique than just the PGMs."
"There is that initial overhang. A whole lot of people will get Anglo-Platinum shares and say, 'I don't want these' and sell it."
"The World Platinum Council is saying we're gonna have deficit again, that's the important point."
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Chapters00:00 Challenges for Anglo Platinum and the PGMs Market 02:22 The Future of PGMs and the Impact of Electric Vehicles 07:54 The World Platinum Council's Projections 09:16 The Diminishing Role of Internal Combustion Engines 11:09 The Impact of Low Prices on Production 14:55 Anglo Gold Ashanti's Acquisition and the Use of Equity 17:56 Pot Withdrawals and their Effect on the Market 19:18 Performance of Leisure Stocks: City Lodge and Sun International 19:42 Concerns about Sports Betting and its Impact 20:10 Upcoming Events: Investment Goals and the Psychology of Markets
In this episode of JSE Direct, Simon Brown delves into the impact of anticipated interest rate cuts and how they may affect various sectors and stocks. He shares his thoughts on potential beneficiaries like consumer stocks, REITs, and companies with high levels of debt. The episode also covers key updates on Nvidia's earnings, Nike's stock valuation, and a new ETF listing by ETFSA.
Interest Rate Cuts and Market Impact:Nike | Close 27 aug 24 | Weekly chart
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