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South Africa Market Review
South African markets closed in the green on Friday, following the release of a robust US labour market report. Banking sector stocks, Standard Bank Group, FirstRand and Barclays Africa Group climbed 1.6%, 1.4% and 1.1%, respectively. Finbond Group gained 0.6%. The company revealed that due to the non-fulfilment of certain pre-conditions the potential acquisition of AIC Holding might not take place. On the downside, Sibanye Gold, AngloGold Ashanti and Harmony Gold Mining dropped 4.3%, 3.7%, and 1.6%, respectively. Retail sector stocks, Lewis Group, Massmart Holdings and Woolworths Holdings Limited/South Africa fell 2.8%, 2.7%, and 2.1%, respectively. The JSE All Share Index rose 0.2% to close at 49,506.59.
UK Market Review
UK markets finished higher on Friday, as upbeat US nonfarm payrolls data enhanced investor confidence. Airline sector stocks, International Consolidated Airlines Group and easyJet advanced 4.3% and 2.6%, respectively, as oil prices declined. Banking sector stocks, HSBC Holdings and Lloyds Banking Group climbed 2.4% and 1.6%, respectively, amid speculation that the expected US Federal Reserve interest rate activity next year would improve the fixed income procedures of banks. Bucking the trend, Randgold Resources and Fresnillo fell 2.9% and 1.4%, respectively, as gold priced dropped beneath the psychological $1,200.00 mark. The FTSE 100 Index advanced 1.0% to close at 6,742.84.
US Market Review
US markets ended in positive territory on Friday, following upbeat US employment data for November. Healthcare sector stocks, Tenet Healthcare and Bristol-Myers Squibb jumped 7.0% and 3.0%, respectively. Among financial sector stocks, SunTrust Banks, Bank of America and Goldman Sachs Group gained 3.2%, 2.7%, and 1.8%, respectively. JPMorgan Chase advanced 2.2%, as it revealed that its CEO, James Dimon, is free of cancer. On the other hand, Cisco Systems dropped 1.0%. The company filed a lawsuit against Arista Networks for infringement of its network patents. The S&P 500 Index climbed 0.2% to settle at 2,075.37, while the DJIA Index rose 0.3% to close at 17,958.79. The NASDAQ Index advanced 0.2% to finish at 4,780.76.
Asia Market Review
Asian markets are trading mostly firmer this morning. In Japan, Mitsubishi Heavy Industries advanced 1.8%, amid news that the company’s Mitsubishi Aircraft unit was planning a late-May maiden flight for its new jet. However, Sony slipped 2.5%, amid heightening uncertainties that North Korea has a role in recent cyber-attack on the company’s film and television unit. In Hong Kong, Tencent Holdings added 1.2%, after reports indicated that the company was collaborating with Japan’s Gungho Online Entertainment to distribute its mobile game Puzzle & Dragons in China. In South Korea, Kia Motors and Hyundai Motor dropped 0.7% and 0.5%, respectively. The Nikkei 225 Index is trading 0.2% higher at 17,950.00, while the Kospi Index is trading 0.4% in the red at 1,979.23. The Hang Seng Index is trading 0.3% in positive territory at 24,077.48.
Commodities
At 06:00 SAST today, Brent crude oil fell 0.5% to trade at $67.87/bl. Data revealed that China’s exports increased less than anticipated, while imports dropped unexpectedly in November, but the trade balance data came in well above market expectations. On Friday, Brent crude oil fell 1.1% to settle at $68.22/bl, on a stronger US dollar and as traders continued to mull over Saudi Arabia’s move to slash oil prices for its US and Asian customers.
On Friday, the Illinois North Central No.2 Yellow corn spot prices rose 1.5% to $3.63/bushel.
At 06:00 SAST today, gold prices remained flat to trade at $1,192.27/oz. On Friday, gold declined 1.1% to close at $1,192.35/oz., after the upbeat US labour market report lifted the US dollar against the majors.
On Friday, copper declined 0.3% to close at $6,515.00/mt. Aluminium closed 0.8% lower at $1,977.75/mt.
Currencies
On Friday, the South African rand weakened against the US dollar, after the official labour market report released in the US showed that employment increased much more than expected in November. Additionally, another report revealed that South African net reserves declined more than anticipated in November. Later today, market participants will eye South African current account balance data for further direction.
The yield on benchmark government bonds rose on Friday. The yield on 2015 bond rose to 6.26% while that for the longer-dated 2026 issue advanced to 7.75%.
At 06:00 SAST, the US dollar is trading 0.1% higher against the South African rand at R11.3672, while the euro and the British pound are trading flat at R13.9645 and R17.6901, respectively.
On Friday, the euro weakened against most of the major currencies. Traders will keep a tab on today’s industrial production data in Germany and the Sentix investor confidence survey in the eurozone for further direction to risk appetite.
At 06:00 SAST, the euro remained unchanged against the US dollar and the British pound to trade at $1.2286 and GBP0.7894, respectively.
Economic Updates
Gross gold & forex reserves in South Africa eased to $48.54bn in November from $48.68bn posted in October.
In November, net gold & forex reserves in South Africa dropped to $42.95bn from $43.09bn reported in October.
The consumer inflation expectations for the next 12 months in the UK fell to 2.5% from 2.8% recorded in the previous survey.
Foreign currency reserves in Switzerland advanced to CHF462.40bn in November from CHF460.60bn registered in October.
The calendar adjusted industrial output in Spain rose 1.2%, on an annual basis, in October, compared with an advance of 1.0% posted in September.
On a seasonally adjusted monthly basis, factory orders in Germany rose 2.5% in October, following a revised 1.1% rise reported in September.
The seasonally adjusted final Gross Domestic Product (GDP) in the eurozone rose 0.2%, in 3Q14, on a QoQ basis, compared with a revised rise of 0.1% recorded in 2Q14.
Nonfarm payrolls in the US increased by 321.00k in November, higher than market expected advance of 230.00k and compared with a revised gain of 243.00k registered in October.
The unemployment rate in the US remained steady at a level of 5.8% in November, in line with market expectations.
On a monthly basis, factory orders in the US fell unexpectedly 0.7% in October, following a revised 0.5% fall reported in September.
The trade deficit in the US narrowed to $43.40bn in October from a revised trade deficit of $43.60bn posted in September.
The number of full time employment in Canada rose by 5.70k in November, following a gain of 26.50k recorded in October.
In November, the unemployment rate in Canada climbed to 6.6% from 6.5% registered in October.
The final annualised GDP in Japan dropped 1.9%, on a QoQ basis, in 3Q14, compared with a revised 6.7% drop reported in 2Q14.
In October, the preliminary leading economic index in Japan dropped to 104.00 from a reading of 105.60 registered in September.
The trade surplus in China widened to $54.47bn in November from a trade surplus of $45.41bn reported in October.
Corporate Updates
South Africa
Anglo American: The company announced that its wholly owned subsidiary, Anglo American Michiquillay SA, has given a notice to the government of Peru to terminate the 2007 privatisation agreement and withdraw from the exploration phase Michiquillay copper project. Additionally, the company revealed that the Executive Director of Anglo American South Africa, Khanyisile Kweyama, has been seconded as the CEO of Business Unity South Africa for a two year term, with effect 2 January 2015.
Steinhoff International Holdings: The company revealed that Alexandre Nodale has been appointed as the CEO of its unit, Conforama, with effect from 1 January 2015, replacing the current CEO, Thierry Guibert.
Finbond Group: The company announced that certain precedent conditions which were required for the potential acquisition of 70.0% stake in AIC Holding have not been fulfilled due to which the acquisition might not take place.
Blame the board for PPC crash, says Ketso: Ketso Gordhan says he feels let down by shareholders who bowed to boardroom pressure and withdrew their request for a special shareholder meeting, which he had hoped would have seen him reinstated as CEO of listed cement group PPC.
Looking askance at Gijima: Jittery shareholders sent Gijima’s share price to a record low of 1.00c as concern about the technology company’s future mounted ahead of the rights offer to be launched on Monday.
JSE returns swell coffers of bosses: The country’s wealthiest Directors, based on their listed shares, tend to be found on the boards of those companies that are firing up the JSE.
ASA orders FNB to withdraw Steve ads: The Advertising Standards Authority (ASA) has ordered First National Bank to withdraw its ‘Steve’ advertisements as it was harmful to children.
Acsion downgrades IPO with no private placing: Property developer, Acsion, is to go ahead with its listing on the JSE on Tuesday, but it will only be an introduction of the company’s shares and not a private placing.
Mining firms keep watch on workers’ garnishee orders: Gold mining firms have stepped up their efforts to police statutory deductions by lenders from their employees’ salaries to address indebtedness in the sector.
Investec Australia fund rallies as it grows: The share price of Investec Australia Property Fund has rallied 6.0% over the past six weeks as the rand hedge property stock continues to deliver on its growth promises.
Fight for Club Med at fever pitch as Kerzner-backed bid takes lead: A takeover tussle of 18 months for French resort company Club Méditerranée SA has taken a new turn as funds associated with Italian investor, Andrea Bonomi, sweetened their bid just three days after the latest rival proposal.
Sasol bond showing strain of plunge in oil: Sasol Limited’s bonds are signaling investor concern that debt levels of the world’s biggest maker of motor fuel-from-coal are coming under pressure amid a 38.0% plunge in oil this year.
OneLaw decides against liquidation: Media reports indicated that Cambist’s troubled former parent company, OneLaw, has not applied for liquidation.
Cambist guarantee ‘still applies’: The manager of the Cambist online platform, Lise Oerlemans, in a media interview, has told that Cambist will still pay out what it owes to its investors. Those who have bought contracts on the platform are due to be paid their next instalment on 10 December and Oerlemans says that they will definitely receive them.
Deputy Sars commissioner suspended: Deputy SA Revenue Service’s commissioner, Ivan Pillay and group Executive of strategic planning and risk, Peter Richers, have been suspended, the revenue service announced on Friday.
Eskom’s load shedding just got worse: Eskom is implementing stage three rolling blackouts “due to high demand or urgent maintenance being performed at certain power stations,” it stated on its website on Friday.
Sirius Real Estate flat on listing: Sirius Real Estate Limited, a wholly Germany-focused property fund, traded in a tightly bound range on Friday morning, after listing on the JSE’s Alternative Exchange (AltX).
CIPC promises quick service for listed companies: The Companies and Intellectual Property Commission (CIPC) has launched a dedicated service for listed companies and its subsidiaries. It hopes to cut the time it takes to process filings including amendments to memoranda of incorporations (MOIs) and changes in directors from up to a month to five to seven work days.
UK and US
Johnson Outdoors: In its FY14 results, the outdoor recreational products maker stated that its net sales fell to $425.41mn from $426.46mn posted in earlier year. Its diluted net income per share narrowed to $0.90 from $1.95 recorded in the previous year.
Merck & Co.: Media reports revealed that the company is in talks to acquire Cubist Pharma for approximately $8.00bn.
Starbucks: The Chairman, President and Chief Executive Officer, Howard Schultz, revealed his new strategy for Starbucks, wherein he disclosed the opening of a 15,000.00 square foot “Roastery,” which is both a coffee roasting facility and a consumer retail outlet.
General Motors: The company revealed that it is recalling approximately 2,283 of its new midsize pickup trucks in the US to fix an air bag wiring issue.
CBS Corporation: The company announced that it has reached a multi-year agreement with Dish Network to end the dispute that led to the programming blackout on Friday night.
Groupon Inc.: The company stated that it has sold about 40,000.00 Ugly Sweaters since mid-October, especially due to the Black Friday and Cyber Monday sales.
delia*s Inc.: The company announced that it has entered into an agency agreement with Hilco Merchant Resources and Gordon Brothers Retail Partners to liquidate all its merchandise and to dispose of certain other items. Additionally, the company indicated that it anticipates to file for Chapter 11 bankruptcy protection in the near term.
Berkeley Group Holdings: In its 1H15 results, the company indicated that its revenue rose to GBP1.02bn from GBP0.82bn recorded in the same period a year ago. Its diluted EPS advanced to 158.80p from 84.70p posted in the corresponding period previous year.
Polar Capital Technology Trust Plc: The company, in its 1H15 results, announced that its total income increased to GBP117.54mn from GBP71.18mn posted in the same period previous year. Its diluted EPS rose to 85.54p from 51.83p recorded in the corresponding period a year ago. Its total net assets stood at GBP719.84mn as on 31 October 2014, 18.7% higher compared with GBP606.63mn recorded as on 30 April 2014.
SEGRO Plc: The real estate investment trust and Slough Borough Council have renewed the landmark Simplified Planning Zone (SPZ) agreement that would enable the rapid creation of new buildings on the Slough Trading Estate for the next 10 years.
Balfour Beatty: The infrastructure company indicated that it has rejected a GBP1.00bn offer for its entire PPP portfolio from John Laing Infrastructure Fund Limited. Separately, the company stated that the review being undertaken by KPMG into its UK construction business is well progressed and field work would be completed by the end of the year.
Interserve Plc: The construction and supports services company announced that it has acquired the Employment & Skills Group, a UK-based provider of vocational training, skills and employability services, from Ares Capital for GBP25.00mn in cash.
Ophir Energy: The oil and gas explorer announced that it has inked a production sharing contract with the Myanmar Ministry of Energy which finalises the award of Block AD-03 offshore Myanmar. The company has a 95.0% operated interest in the block, which is located in the Rakhine Basin.
Financial Times
Black Friday kicks off wave of discounting for UK stores: Discounting has been stepped up on the UK high street, in the wake of the busiest Black Friday in the country’s retailing history and in the lead up to Christmas, as the US’s traditional post-Thanksgiving shopping spree gains in popularity outside of the country.
Labour seeks to tighten UK shale gas rules: Labour will seek to tighten the regulations governing the extraction of shale gas on Monday as the UK opposition party hardens its stance over the contentious technology.
Companies defences against corruption still inadequate: More than a third of multinational companies still have inadequate defences against corruption, more than three years after the Bribery Act took effect, new research has found.
Premier Foods vows to ‘simplify’ supplier payments: Premier Foods is to “simplify” its practice of asking suppliers to make annual cash payments or risk losing their contracts, the company has said in a reaction to pressure from politicians.
BP considers job cuts in face of plunge in oil price: BP is accelerating plans to reduce its headcount, in a sign of how global oil companies are looking to control costs in the face of a lower oil price.
UK provincial airports go over head of London: The first regular direct flight from the UK to China outside London takes off on Monday, as Cathay Pacific launches its Manchester-Hong Kong service.
UK financial watchdog to review soaring level of fines: The UK’s financial regulator is to review its fining regime amid increasingly anguished cries from banks over the inexorable rise of penalties.
FirstGroup attempts to turn corner after difficult six months: When Sandell Asset Management appeared on the share register of FirstGroup in November 2013, investors hoped the US activist investor would galvanise change at the UK bus and rail group.
Oil price fall provides fillip for UK economy: The economy has picked up steam as companies across the UK report faster growth and lower costs because of the fall in the price of oil.
Falling oil price stresses urgency of climate change agreement: The tumbling price of oil underlines the urgency of agreeing an international global warming treaty, the minister presiding over this week’s UN climate negotiations in Lima has warned.
Pentagon joins international fight to halt drug-resistant malaria: The US military is throwing its weight behind an international campaign to stop drug-resistant malaria spreading from Southeast Asia to Africa and triggering a fresh international health crisis.
Old drugs put under the microscope: Seven of the world’s biggest drugmakers will invite UK researchers to take a second look at experimental medicines that failed to reach market in the biggest deal of its kind between big pharma companies and academia.
N Korea denies being behind Sony attack: The Pyongyang government’s state-run media said the cyber-attack on Sony’s Hollywood studio may have been the work of pro-North Korean supporters in a report on Sunday that dismissed charges that the country itself was to blame as “wild rumour”.
Japanese titans slim down and fight back: When Panasonic announced last September it would sell a majority stake in its healthcare business to KKR, the US private equity group, investors barely blinked.
Rakuten boss defends acquisition record: Rakuten is looking to its messaging app, Viber, to tie together customers from across its global network of sites and services, according to the Japanese ecommerce group’s founder, as he defended his company’s record of acquisitions.
Fresnillo: lost 0.3% to GBP7.27, following weaker gold and silver prices on commodities markets.
Vanguard: Passive, aggressive: When a shareholder gives up and sells, taking a loss — exit. Picks up the phone and asks for a polite word with the chief executive — voice. Hangs in there quietly — loyalty. Low-fee performance of this sort attracts a relentless flow of money — but not necessarily from people who trade much, or pay attention to corporate governance. Vanguard feels it should protect those investors and last week suggested “shareholder liaison committees” as an answer. Company directors should discuss strategy with owners more often — in short, listen harder. This is better than nothing. It is not however the same as ‘voice’ for shareholders, unless the shareholders know what they want. Consider: among its shareholdings Vanguard has $8.00bn apiece of Google Class A and Class C stock, stakes of about 4.0% and 5.0%, respectively. It owns none of the Class B super-voting shares: Larry, Sergey and Eric own those instead. Perhaps Vanguard does not like serfhood. Vanguard also owns 5.0% of JPMorgan. Given more time with the bank’s directors, Vanguard could ask why one of them is both Chair and Chief Executive.
M&A: Buyer’s retort: “M&A destroys value,” we are often told. But things may be changing. Dealmaking has roared back recently, and shareholders are bidding up the stock of companies doing the deals. Timid firms that are hoarding cash or buying back stock should consider the implications. In recent years, one-day share price reactions for acquirers have turned positive. Does this suggest companies are better at M&A these days? Perhaps. But consider two ephemeral factors. First, with corporate cash balances high and debt cheap, earnings accretion is easier to achieve (accretion does not necessarily imply value creation, but it plays well). Second, given weak volumes after the financial crisis, today’s deals may be the highest quality ones that had been put on hold. Swashbuckling CEOs should remain humble.
Uber: taxi driver: Uber is now worth more than Tesco, Peugeot, or Hilton Hotels. Investors have just stumped up $1.20bn at a valuation of $40.00bn. A lot, for a taxi driver. This is all the more striking because Uber is hardly the only company that will let you order a quick ride from your phone (or turn your own car into a taxi). Some two dozen similar companies have, collectively, raised more than $1.50bn in the past two years, according to data from CB Insights. Uber is not, however, a first mover in many cities – particularly in Asia. Competitors like GrabTaxi (Southeast Asia) or Didi Dache (China) carved out loyal customer bases before Uber arrived on the scene. In India, where Uber launched a year ago, price wars are under way with locals like Ola (founded in FY10) and TaxiForSure (FY11). Pricey publicity stunts – such as Uber helicopter rides – ensued. Some investors are placing big bets on Uber’s competitors: SoftBank invested $250.00mn in GrabTaxi this week, and led a $210.00mn round for Ola in October. Uber is priced for world domination. For now, though, its success is highly regional. It has just one advantage over every rival, in every jurisdiction: heaps and heaps of cash, with which to drive competitors into the ground.
*Published with special permission by Anchor Capital (ACG)