NHI hammers Discovery, Aspen; Junk priced in; Rand falls; investment banks chop staff; Naspers India play

By Jackie Cameron

  • Moody hasn’t said it, but investors already think it: South Africa’s credit is junk. That’s according to Bloomberg, which says the market is pricing in a downgrade. The risk premium has climbed since mid-July, when the government announced it would increase borrowing to support Eskom. South Africa isn’t benefiting from the global hunt for yield, says the news wire. “While average local-currency yields for emerging markets have been falling, South Africa’s have been rising. The premium of South African yields over developing-nation peers is now at the highest since February. That suggests investors are positioning for fiscal deterioration, and a credit downgrade.” The cost of insuring South Africa’s debt, it continues, against default is much higher than that of Russia, which has a similar Baa3 rating with Moody’s. It’s also higher than Brazil, rated two levels lower. Moody’s has been “too kind,” Win Thin, head of currency strategy at Brown Brothers Harriman & Co, tells Bloomberg. The analyst predicts South Africa’s credit rating may fall three levels into junk.
  • Monday was a hairy day on the JSE with some shares dramatically up and some dramatically down. With four of top losers of the day in the healthcare sector – including market darling Discovery – analysts say this is linked to the NHI bill and what it actually means for these stocks. Aspen and Discovery led the way, with Aspen down more than 10% and Discovery down about 8% –  down 16% since the bill was made public on Thursday. Dischem dropped nearly 6% on Monday.
  • The big winners of the day were mostly gold shares on the back of a rise in the bullion price. Investors are nervous about global markets and seeking safe havens. In addition, Sappi was up more than 12%. A US investment house put a bullish note out on the company, say analysts, which helped to spur the stock price upwards.
  • The Rand weakened to a new 11-month low as political uncertainty and a bleak economic outlook was worsened by uncertainty over the chances of a resolution to the trade standoff between Beijing and Washington, reports Reuters.
  • Investment bankers used to be in demand, commanding huge salaries. But, as the Financial Times of London reports, global investment banks are shedding tens of thousands of jobs as falling interest rates, weak trading volumes and the march of automation create a brutal summer for the sector. Almost 30,000 lay-offs have been announced since April at banks including HSBC, Barclays, Société Générale, Citigroup and Deutsche Bank.
  • Meesho, an online marketplace that is revolutionising e-commerce for Indian entrepreneurs and consumers, announced today the closing of a $125m fundraise led by Naspers. Facebook and existing investors SAIF, Sequoia, Shunwei Capital, RPS and Venture Highway also participated. More on that, in BizNews briefs.