Permalink 13:03:27, by Natalie Email , 301 words, 37 views   English (EU)
Categories: Morning Markets

Uncertainty reigns in local and international markets

Local Markets

The JSE All Share mirrored Asian and European markets this morning as it continued its downward tumble, falling by 6.58% to 18309.26 points at 12:00 today. Contributing to the weaker JSE is the continuing losses in the mining and resources sectors, as prices of precious metals persist in taking a dive.

The uncertainty in global financial markets is affecting the gold price, which has dropped by 4.38% to cost $688.50 per ounce.

The Rand has been fickle this morning, shaken up by volatility in Asian and US markets. At 12:06 a US dollar cost R11.28, an improvement of 2.26%.

International Markets

In the US, the Dow Jones finished up 2.02% at 8691.25 points yesterday, as investors showed an optimistic streak after company turnovers were better than expected in the current economic climate. However, the tech-dominated Nasdaq closed at 1603.91 points, down 0.73%.

By midday, the FTSE 100 was down 8.80% to 3728.07 points as investors head for safety, expecting bad news for Britain’s economic growth this quarter.

Hong Kong’s Hang Seng dropped 8.30% to 12618.38 points, closing below the 14,000-point level for the first time since 2005. Investors want to protect their capital rather than look for growth opportunities, and are leaving equity markets for more stable bond markets.

Japan's Nikkei dropped 9.60% to a very low 7649.08 points, after investors rushed to get out of equities. This was largely due to news of poor company profits, coupled with a Yen that strengthened to a 13-year high against the dollar, hurting Japanese companies which rely heavily on exporting to overseas markets.

Company News

Pretoria Port Cement enjoyed a large volume of trade this morning, resulting in a higher share price of R24.74 just after midday, an increase of 0.53%.

DRD Gold Limited however experienced a loss of 25% this morning, trading at R3.90 per share at lunchtime. The loss follows the trend of falling prices for precious metals.


Permalink 18:04:30, by ian Email , 453 words, 11 views   English (EU)
Categories: Markets

Emerging Market Turmoil

The turmoil in the world’s financial system is defying past levels of volatility. Tuesday saw the Zimbabwe Stock Exchange Industrial index up 257% in one day, following a 241% hike on Monday. Wednesday saw the US equity markets down to new 6 year lows. Argentina’s government made a surprise proposal to nationalise the $30 billion private pension system –yields on their bonds spiked up.

Risk capital that had slowly started creeping back in search of higher returns post the late 1990 Asian crisis, has now very quickly found its way back to the US and Europe. Shorter dated money market instruments and even longer dated US bonds have found favour from investors keen to ensure protection of capital and limit any further losses.

As a consequence of money flows and the sudden loss of appetite for risk, emerging market bond yields spiked up as investors pulled money and effectively demanded higher yields for the increased risks.

And so in a very nervous global system, investors have preferred to lend their money to the US government on 3 month Treasury bonds for a very low 1% annual nominal yield.
Lending for 12 months will provide just 1,64% in US dollars.

Still at these exceptionally low yields, money is pouring back from risky emerging markets into US and Europe shorter term money markets.

It’s having a marked impact on emerging market exchange rates.

So what do we have.

In Zimbabwe runaway inflation has been caused by government’s excessive printing of currency. Private individuals know that one of the few available means to hedge against inflation is to buy a real asset. I.e. shares in some of the companies listed on the stock market. The index gains over 500% in 2 days (In Zim Dollars)

This is an example of a complete breakdown of trust in the medium of exchange – i.e. the Zim dollar. Could it happen elsewhere?

Across the globe, given Argentina’s proposal to take control of pension assets, trust dissipated, resulting in the yield on their 2033 maturity bonds falling from around 12% just one month back to over 28%. I.e. where one month ago lenders were satisfied in receiving 12%, they are now demanding over 28%.

Emerging market and high yield spreads have widened dramatically as capital flees. Bloomberg reports that Emerging market bonds have lost 22% so far this month.
For now US bonds are seen as a safe haven. It is unlikely to persist over any reasonable period of time.

Kind regards

Ian de Lange
021 9144 966

If you would like to discuss your asset allocation of your portfolio, please don’t hesitate to contact Vincent Heys at Vincent@seedinvestments.co.za. He is in JHB next week Thursday for one on one meetings.

Permalink 13:29:10, by Natalie Email , 335 words, 292 views   English (EU)
Categories: Morning Markets

Markets continue to sink worldwide

Local Markets

The JSE All Share followed international markets down a slippery slope this morning, declining by 2.91% to sit at 19698.60 points at midday.

The losses could have been worse if it weren’t for the weaker Rand, which managed to gain 1.43% to settle at R11.50 to the US dollar at lunchtime. The Rand continues to be punished by falling share and commodity prices, the strengthening of the US dollar, and investors’ current distaste for riskier emerging markets.

The stronger dollar also caused the gold price to drop 3% to R721.65, after investors felt safer switching to cash assets as global recession fears show no signs of dissipating.

Platinum also took a hit, trading at $833.00 an ounce, a drop of 1.77%. About 50% of the demand for platinum is derived from the automotive sector, which expects car sales to decline if consumption decreases as predicted.

International Markets

A fresh round of recession fears coupled with deficient corporate results and tight credit affected US indicators yesterday. The Dow Jones suffered a 5.69% loss, closing at 8519.21 points after investors continued to rid themselves of their riskier assets. The Nasdaq also finished 4.77% lower, at 1615.75 points.

The FTSE 100 had lost 2.35% by midday today, settling at 3946.01 after the mining sector was hard hit by fears that the impending global recession might be more severe than previously thought.

The Nikkei closed at 8460.98 points this morning, dropping 2.46% as investors reacted to popular opinion that the global economy will continue to slow into a full-blown recession. Hang Seng investors suffered from the same worry, finishing 3.55% lower at 13760.49 points.

Company News

Investec PLC issued enhanced dividend securities today, and as a result enjoyed a share price gain of 6.6% as traders jumped in to buy at R41.30 per share at 12:10.

Sanlam Limited also enjoyed a high volume of trade this morning, gaining slightly at 1.05% to sell at R14.50 per share at midday.

Also in the Life Asssurance sector but not doing as well, Old Mutual PLC experienced a 8.07% drop in the share price to sell at R9 per share by 12:13.


Permalink 18:00:44, by mike Email , 515 words, 82 views   English (EU)
Categories: Markets

Medium Term Budget Policy Statement

Yesterday saw the release, by Trevor Manuel, of the Medium Term Budget Policy Statement, which has been dubbed the ‘Mini Budget”. A fairly recent innovation, the mini budget allows the finance minister the opportunity to address the public in a formal manner, giving an update on events since the past budget speech, and looking forward over the following three years. In essence the minister reduces the importance and impact of the annual budget speech by guiding the market mid way through the government’s financial year.

Unsurprisingly, given the nature of the global economy, the statement began with an overview of global events, and how these dynamics have altered the world going forward. Minister Manuel mentioned that despite the ‘storm’ being fierce, South Africa was well prepared, and has been able to weather the storm to a certain extent so far, and that the storm would eventually pass.

Following on from this overview it was logical that he should mention that economic growth expectations have been cut for 2008 from 4% to 3.7%, and that 2009 growth should come in at 3%, significantly below the 5% that we’ve been accustomed to, and arguably not high enough to create jobs.

On the inflation front, in the future, CPI (rather than CPI-X) of between 3 – 6% will be targeted, as South Africa makes the adjustment to using ‘owners' equivalent rent’ as a proxy for the measure of the cost of housing, as opposed to the previously used interest on loan measure (that was impacted by monetary policy, and hence excluded from the current inflation target). There is the expectation that inflation will come into this range in the third quarter of 2009.

Key priorities of the government going forward are: Providing of quality education to all (and an expansion of no fee schooling to 60% of learners), improving the provision of healthcare, and particularly reducing infant mortality and tackling TB and HIV/AIDS. Other priority areas are improving the criminal justice sector and public infrastructure (public transport, water, sanitation, housing, etc).

Some of the adjustments in expenditures include an increase of R 2.5bn to the Road Accident Fund, R 344m to the school nutrition programme, R 1.4bn to cover FIFA World Cup cost overruns, and provision for a R 300m to assist Zimbabwe with short term food requirements should various conditions be fulfilled.

Essentially the government has been in the fortunate position over the past few years in terms of the revenues that they have received; they are now able to increase spending to support those sections of the population that will come under pressure as the economy slows.

Reports earlier today reported that Trevor Manuel has said that he’s been finance minister for too long now, and that he is in discussion with the ANC leadership as to his future in the party’s leadership. It will be a sad day when he leaves, but like any functioning democracy there comes a time when every leader needs to be replaced, and Mr Manuel has had an extended run in the hot seat.

Kind regards,

Mike Browne

Permalink 15:01:05, by Natalie Email , 280 words, 188 views   English (EU)
Categories: Morning Markets

All-share down again

Local Markets

The All Share dropped by 3.61% to 20498.21 points just after midday, suffering losses in the resources, banks and financials sectors. At the same time, the Oil & Gas index dropped by 4.5% to 20129.44, reacting to the prospect of lower global demand.

Current commodity favourite, Gold also dropped 2.05% to sell at R756.20 per ounce, after drastic moves to stabilise European and US banking brought a faint wave of calm, reducing the perceived safety of the precious metal.

At ten past midday, the Rand had gained 2.52% to the dollar, selling at R10.91. Greater improvements are unlikely as fears of a global recession continue.

International Markets

The Dow Jones dropped by 2.50% to close at 9033.66 points yesterday, as the weakening economy forced large corporations to reassess their profit outlooks, especially in the industrial, mining and technology sectors. However, the NASDAQ just managed to close on the up last night, improving 0.04% to 1696.68 points.

Across the Atlantic, fears of slowing business activity and falling corporate earnings caused the FTSE 100 to drop this morning by 3.04%.

Asian markets fared no better. The Nikkei closed 6.8% lower yesterday, after the Yen strengthened to the detriment of exporters already battling against falling demand. In China, the Hang-Seng had dropped 5.15% by lunchtime.

Company News

DRD Gold Ltd enjoyed a large volume of trade this morning despite a dip in the gold price, improving 4.24 % by midday, when a share cost investors R5.65.

In the business support services sector, Excellerate Holdings Limited gained 2.04% to sell at R1 per share.

In the metals and minerals sector, Bhp Billiton Plc (BIL) dropped 6.88%, to R162.50 after reports were released that expected a slowdown of Chinese demand, though no significant changes are expected in Bhp’s financial position.

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