The Traders' Update, 21-22 August 2023
Realeboha Molaba
Actuarial Junior Consultant; Actuarial Science Honours Graduate from the University of Cape Town; Actuarial Science and Mathematical Statistics Graduate from the University of the Witwatersrand
Segment 1: Overseas Markets
European Markets
Equity markets closed marginally lower to higher on Monday, i.e.:
The pan-European Stoxx 600c closed 0.1% higher with auto stocks closing 1.1% higher to lead the gains. Construction and material stocks, however, fell to close 0.6% lower.
On the individual shares front, British housebuilder firm Crest Nicholson shares fell by over 8% after the company announced that it revised down its full-year pre-tax profit estimate by 32.16% to ￡50 million (US$63.5 million). The fall is due to a persistently high inflation environment and rising interest rates which have rocked the U.K. property market over the summer.
On the data front, a survey from a property website, Rightmove, in the U.K. discovered that U.K. home prices fell by 1.9% in August, which is the steepest monthly fall recorded since 2018.
Germany's central bank, Bundesbank, stated that it expects the country's inflation to remain well above the Bank's 2% inflation target for longer than expected. Headline inflation fell slightly in July to 6.5% from 6.8% recorded in the previous month.
Asia-Pacific Markets
Hong Kong
Property management firm Country Garden Services Holdings is expected to be removed from the Hang Seng index and to be replaced with pharmaceutical firm Sinopharm. The company will also be removed from the Hang Seng China Enterprises Index. The share price of the company has plunged over 70% from the start of the year after the company failed to meet its bond coupon obligations , issued a profit warning and suspended the trading of 11 of its onshore bonds.
The Hang Seng closed 1.82% lower at 17,623.29.
Mainland China
The People's Bank of China cut the 1-year loan prime rate by 10bps to 3.45% and kept the five-year LPR (lending prime rate) steady at 4.2% in an attempt to stimulate economic growth and activity in the world's second biggest economy. Polled economists had also expected the five-year LPR to be also cut.
Mainland markets closed lower, i.e.:
Japan
Markets closed higher, i.e.:
South Korea
Markets closed higher, i.e.:
Thailand
The National Economic and Social Development Development Council reported that the country's GDP grew by 1.8% year-on-year in the second quarter of 2023, below expectations of a 3.1% increase.
The SET Composite Index closed 0.44% higher at 1,525.85.
Australia
The S&P/ASX 200 closed 0.46% lower at 7,115.50.
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New Zealand
The country's July trade balance fell to a deficit of NZ$1.1 billion (US$652.67 million) compared to the NZ$9 million surplus recorded in June. This is the first time a deficit has been recorded since March. Exports fell by 14% year-on-year to NZ$5.5 billion while imports fell by 16% year-on-year to NZ$6.6 billion.
The S&P/NZX 50 closed 1.31% lower at 11,458.69.
U.S. Markets
Equity markets closed mixed, i.e.:
Cybersecurity firm Palo Alto Networks led the gains in the tech stock rally after the company reported earnings results that beat estimates and issued a positive medium-term outlook due to strong demand. Chipmaker Nvidia shares also advanced ahead of the release of its earnings report on Wednesday. Artificial intelligence stocks Broadcom and Applied Materials also benefitted from the rally.
Pharmaceutical company Moderna shares lifted after reports showed that the Biden administration might advise Americans to step up their defenses against the new Covid-19 variant.
Electric vehicle maker Tesla shares recovered are tumbling by more than 8% last week as Baird Equity Research added the stock to its "best ideas" list thus inciting excitement over the launch of the carmaker's Cybertruck and the firm's potential expansion into new markets.
Insulin pump manufacturer Insulet was the worst-performing stock in the S&P 500 after Baird Equity Research analysts noted that the adoption of GLP-1 and other alternatives by diabetes patients could negatively impact the firm's sales.
Cosmetic company Estee Lauder shares fell after the company's outlook for 2024 missed expectations as consumer demand in the U.S. and China fell and hence many analysts dropped their price targets for the stock. Clinical trial management company Fortrea Holdings shares also fell after the company spun off from Labcorp in July as market participants raised concerns over the company's future growth prospects.
Segment 2: African Markets
Nigeria
Analysts expect audited financials from tier one banks to be released this week as the major fundamentally sound securities pulled back from their previous highs.
Kenya
The government aims to boost its economic growth over the next four years with plans to invest in the agricultural and small business plans. Under the finance ministry's medium-term development plan, the government aims to achieve a minimum economic growth of 7.2% by 2027.
Zimbabwe
The government has published new regulations that cause developers of carbon credits to pay 30% of the proceeds for the first decade of the project as an environmental levy to the country's tax authorities.
Segment 3: South African Markets
JSE-listed private schooling group reported a significant increase in earnings in the six months ended 30 June 2023. The company's revenue grew by 16% to R2.39 billion, compared to the same period last year. It plans to invest up to R800 million in capital projects to maintain, replace and expand facilities.
Entertainment company MultiChoice is at risk after broadcasting numbers in July fell by 20%. The company is facing an uncertain future as its new strategy around new revenue streams is said to not be watertight. On the other end, market research showed that streaming numbers hit a new higher benefitting streaming platforms like Netflix.
Coal exporter Thungela Resources reported that its profits fell by 69% to R3 billion in the six months ended 30 June 2023. Profits fell due to weaker coal prices and logistical constraints like the collapsing rail freight locally. Due to the Transnet rail freight challenges, the miner expects to scale back annual coal output by 2 to 3 million tons.
Segment 4: JSE Morning?Update