Flash Briefing: US shares new high; Eskom OK – Gordhan; Son loses $130m on Bitcoin; Omnia rebounds

By Alec Hogg

In today’s global business news headlines:

  • America’s S&P 500 and Nasdaq Composite indexes reached new all-time highs yesterday. Gains took the S&P past its peak set on September 20 last year; and the Nasdaq beyond the all-time high of August 29. The S&P 500 has risen 17% in 2019, its best start to a year since 1987. The indices reflect the steady improvement in US share prices which is based on growing optimism over corporate profits; that Donald Trump will secure a good deal on trade talks with China; and the cautious approach by the US Fed to raising interest rates. After a sharp fall towards the end of 2018, many predicted that the longest bull market in history was ending, but 2019 has been a different story and investors who exercised patience late last year are drawing the benefits.
  • South Africa’s state-owned power utility Eskom “isn’t on the brink of financial collapse” and the government has the problem “well under control,” according to Public Enterprises Minister Pravin Gordhan. Speaking yesterday on Talk Radio 702 Gordhan said “We have had an extreme financial difficulty as a result of state capture – the damage that has been caused has been huge. We understand what changes need to be made.” In February, the South African Government announced a R69bn bailout of Eskom spread over three years. The intention is to provide breathing space for the utility to split its operations into three units – production, transmission and distribution – ahead of the private sector being encouraged to enter as competitors in electricity production and sales.
  • The founder of Japan’s massive new-age focused venture capital fund Softbank lost more than $130m on a personal bitcoin bet he took when the cyber currency’s price peaked at $19,000 in December 2017. The London Financial Times reported yesterday that people close to the action confirmed that Masayoshi Son, founder of Softbank, lost more than $130m in a personal punt on bitcoin when he sold after the price tumbled. Bitcoin currently trades at around a quarter of its peak of 16 months ago. Son’s investment came around the time that it was completing a $3.3bn takeover of US money manager Fortress Investment Group whose co-chairman Peter Briger, a well-known bitcoin enthusiast, was among who recommended the cyber currency to the Japanese billionaire. Briger is still the principal at California-based Fortress, which manages $40bn in assets on behalf of investors.
  • South African share prices followed global markets higher yesterday, gaining half a percent overall with winning shares beating losers two to one. Chemicals group Omnia rebounded strongly, picking up 16% after being hit after a trading update ahead of the long weekend. It warned of a R1bn bottom line slump to a loss of R400m in the year to end March. Omnia’s price lifted after an announcement yesterday that the company has been supported by debt providers in its efforts to restructure borrowings to ensure sustainability of the business. It said there was no need for any unscheduled debt payment or recapitalisation of the business. Oceana Group, whose largest shareholder Tiger Brands recently announced an unbundling of its stock, was a feature among the losers, giving up 5%. Among the heavyweights, Gold Fields fared worst with a 5.5% price decline.