Five Shares: Platinum group metals and gold the shining lights
CAPE TOWN – President Cyril Ramaphosa needs to make sure he uses the opportunity in Thursday’s annual State of the Nation address (Sona) to set the scene for the economic medicine that will need to be taken in the Budget later this month.
In last year’s Sona, he remarked on the 25 years of progress that the country had made in reducing poverty, and how the government intends to reduce unemployment.
Whether this could be considered a factual reflection in this year’s Sona is debatable. Most of us became a little poorer in 2019, and will probably do so this year too. Unemployment has plumbed new depths – we now have the highest rate of joblessness in the world.
He also said the National Development Plan would become the centre-piece of government action in 2019, but we haven't heard a word about this plan since then.
Critically, he needs to use the platform of Sona to signal to the market that the government has moved away from platitudes and started taking action to turn the economy around. He needs to do this so companies can begin reinvesting and creating jobs.
He certainly doesn't have a shortlist of other problems that he could tap into on Thursday. Consider the cost of electricity; load-shedding; lack of investment; failure to tackle corruption; lack of basic services; land expropriation; high crime; education and health problems, bankrupt state-owned organisations and climate change. These are just some of the issues.
Structural changes need to occur in South Africa against a cloudy global growth horizon, putting even greater pressure on the local economy.
Growth in the two biggest economies, China and the US may falter from the coronavirus impact, uncertainty surrounding the China/US trade talks and US Presidential elections.
Considering all this, the JSE has done well so far this year to hold its own. Its All Share Index, which opened at 57 718 points on January 2, dipped to 55 902.94 at the end of January as the coronavirus fears hit global markets, but has risen nearly 3 percent this month again to open at 57 531.49 on Friday.
However, the index's future, despite the fact that many of the companies that make up the index have most of their operations overseas, is also tied to the fortunes of South Africa, and perceptions about investing in the country.
What worried last week was the release of the interim results of the OneLogix Group transport company, which operates in South and Southern Africa.
OneLogix, although still in a healthy position, reported a drop in headline earnings for the first time in ten years, following almost no turnover growth, due to the lack of demand, and its management doesn't anticipate an improvement in the trading environment this year.
No change is not good for JSE-listed company prospects that are tilted to SA Incorporated. It also signals weak returns.
Fortunately, the JSE is widely diversified, and some stocks, such as the platinum mining companies, hold promise from other markets.
The FTSE/JSE Platinum Mining Index, for instance, after rising some 200 percent last year, looks set to continue to strengthen after dipping along with other world indices in the initial market reaction to the coronavirus. The index was 1.9 percent up on Friday at 66.5 points, much in line with where it was on January 2, but it has recovered by 22 percent since January 27.
Platinum prices are being driven by growing demand from carmakers due to tighter emission standards for vehicles, supply constraints and the safe-haven perceptions that surround precious metals.
Northam Platinum was up 1.78 percent to R129.18 on Friday, bringing its increase since January 2 to 4.5 percent.
Impala Platinum, the JSE best performing stock in 2019 with a 291 percent gain, was 3.26 percent higher at R149.94 on Friday, and its gain since January 2 is 4.5 percent.
Harmony Gold Mining Company, off the back of higher bullion prices, on Thursday forecast a 7 111 percent rise in interim earnings to December 31, 2019. Its share price was up 1.18 percent to R46.24 on Friday.
Making headlines last week was Balwin Properties announcing a rare multibillion-rand investment in residential property. It was a bold investment, but the company has proven innovation and consumer lifestyle desirability on its side with its proposed Crystal Lagoon estate.
The market rewarded the announcement of the project with a 4.76 percent increase in the share price to R3.30 by midday Friday.