Investors facing a see-saw season on the JSE
Six weeks ago the group, South Africa’s biggest vehicle importer with interests in Australia, said in a pre-close statement that the local and global economic and political environments had become challenging and that major changes in the global motor industry are under way, such as in the way vehicles were purchased, used and maintained.
However, the lower share price was likely to have followed the release late last week of national vehicle sales statistics, which continued to decline in July 2019, with new car sales falling a whopping 8.2 percent compared with the same month last year.
The recent lower interest rate by 25 basis points may provide some relief to the new car market in the next few months, but it's balanced by a range of new administered price increases hitting consumers in the second half. And there is no getting away from the weak economy, the poor financial position of consumers and the government inaction on structural reforms.
The National Association of Automobile Manufacturers of South Africa remarked on Friday that an anticipated turnaround in new vehicle sales in the second half of this year had not yet materialised. Perhaps this was too much to hope for, too soon.
Encouragingly, however, there was growth in all three commercial vehicle segments in July, an indicator perhaps of rising industrial and commercial sector activity.
The share prices of gold miners Harmony, AngloGold Ashanti and Sibanye-Stillwater featured among the big share price gains on Friday, rising 5.45 percent, 3.74 percent and 3.85 percent respectively. All three shares have risen strongly since May.
The miners have been tracking a rising gold price, which in rand terms was up 2.2 percent to R21088 per ounce around midday Friday, this after increasing about 2.5 percent on Thursday. These prices are very close to a recent 10-year rand price high for the yellow metal.
Driving it was US President Donald Trump’s plans to impose an additional 10 percent tariff on some $300 billion (R4.42 trillion) worth of Chinese imports, starting September 1, renewing trade tensions between the two countries, generating new appeal for so-called safe haven assets like gold and increasing the chances of further rates cuts from the US Federal Reserve, which is also good for gold bugs.
Also, the rand remains on a weakening trend.
The share price of the biggest bank in Africa, Standard Bank, fell 2.1 percent at one stage on Friday to R174.92 per share, extending its decline to 4 percent over a week, and to around 15 percent in two weeks. These are big declines, and the trend is mirrored, broadly, in the prices of competitors Absa and FirstRand. The declines follow the interest rate cut late last month.
Shares in UK shopping centre operator intu were up 3.1 percent to R8.10 midday Friday, but it represents a desperate claw-back considering it had fallen more than 42 percent in two weeks.
On Wednesday intu reported a fall in first-half net rental income, as it struggles against weakness in the British retail store sector brought on by increasing online shopping, Brexit and a soft trading environment. The company also recently fought two failed takeover bids.
The trouble in High Street has impacted intu through store closures and company voluntary agreements - which is an insolvency procedure used by retailers to restructure leases - and negotiations for lower rents.
The company wants to preserve cash, cut costs, sell three of its 17 malls, reduce debt and is also working on enhancing the entertainment experience at its malls.
On Thursday, the Bank of England said it expects the economy to grow 1.3 percent this year, lower than an earlier forecast of 1.5 percent, if the UK leaves the EU with a negotiated deal. Many have warned of a sharp shock to the UK if it leaves the union without a deal, a scenario that has yet to be ruled out.
I feel sanity will prevail, though. intu’s PE ratio is around 3, making it, to my mind at least, a fair attraction for a longer-term value investor.
Naspers shares were down 3.5 percent late Friday afternoon at R3515.62 each, a big move for the country's most expensive share. The decline was more or less in line with a 3.8 percent drop in the shares of its biggest investment, the Hong Kong-listed Tencent.
Naspers’s planned listing of its internet assets in Amsterdam was last month postponed until September, due to mailing glitches to shareholders (which have since been overcome), which had lowered the share price for a while, but have since recovered. Shareholders will vote on the listing on August 23.