The world is changing fast and to keep up you need local knowledge with global context.
As is customary for a Monday, Sasfin Securities David Shapiro eases us into the week with a host of investment insight covering local and offshore markets. China’s third-quarter GDP figures were worse than expected as more ominous data came out of the world’s second-largest economy. This is bad news for South Africa, with our economy becoming increasingly dependent on China. Shapiro unpacks the investment propositions of Johann Rupert’s Remgro, Richemont and Reinet, all of which house the business tycoon’s different financial interests. Lastly, insider trading on the JSE is discussed following Hulamin’s 40% rally days before a cautionary announcement was released to the market. Coincidence? Shapiro thinks not. – Justin Rowe-Roberts
On Mediclinic’s upbeat trading statement:
I think it’s the elective surgery that is coming back and they had very good numbers out of Switzerland and also out of the Middle East. I think that’s where it’s starting to happen. I would imagine it’s going to happen here; you can only delay up to a point. Eventually, you’re going to have to address those issues. Delaying what are general appointments on tests and that one does on a regular basis – in other words, regular checkups – eventually causes more problems. I think people will start coming back. You can almost feel confidence starting to rise. I know they’re not dropping their guard but I think those kinds of things are certainly going to be seen. Let’s see with Netcare. That will be a test because they’re the ones without any overseas exposure. They’ve given up their offshore operations. So, we’ll see what they have to say about it. Reports are that there are very few Covid-19 cases in the major hospitals at the moment. The pressure is off. Let’s see. Hopefully, it translates into hospitality as well.
On Johann Rupert’s Richemont, Remgro and Reinet as investment propositions:
Only Richemont. To be fair, I think I’m not mad about Reinet. I don’t know enough about the British American Tobacco side of it. I know that’s coming down quite a bit. I like Richemont and I think luxury is coming back and they’re also reshaping the model. They’re bringing in Farfetch, which is a luxury online site. I’m very interested in Remgro. I think they can do more. There are some good underlying operations. I’ve been cynical about the whole thing because it was always swamped by Mediclinic and FirstRand. I would love to see them release some of their other stuff as well.
On China’s GDP growth missing expectations:
It’s interesting but I think they’ll overcome it. I think they had the perfect storm, everything hit them at the same time. The power crisis is a worry. It’s a big worry for them because I don’t think anybody expected it. The fact that they’re actually restricting or confining energy to some of the factories is a little bit of an issue. But hopefully, that will subside. I see European markets are a little down on those numbers but they don’t like to be embarrassed. I don’t think they like to be shown up. The last thing they want is for people to feel sorry for them. So, I think they’ll overcome it. They’re not the kind of numbers we see from China. The one thing that was positive is retail sales are still up. I’ve toned down my views on China, but I haven’t written them off completely.
On whether insider trading on the JSE is an issue:
Yes, of course, it is. We talk too much and we leak too much. We don’t stamp it down. It should be monitored. I just see incidences like this all the time because that’s what I do on a daily basis. I say, what’s gone on up today or what’s going down? You can see where suddenly patterns are emerging. And I said, what’s the story? I keep looking for the story and I can’t find it. Then something happened, particularly in the Hulamin story.
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