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South Africa Market Review, 30 December 2014
South African markets closed higher yesterday, buoyed by gains in gold miners. Harmony Gold Mining climbed 7.7%, following Van Eck Associates Corporation’s decision to more than double its stake in the company. AngloGold Ashanti and Gold Fields gained 5.4% and 5.3%, respectively. Aquarius Platinum, Impala Platinum Holdings and Anglo American Platinum rose 4.2%, 3.8% and 1.7%, respectively. Mr Price Group, Woolworths Holdings and Clicks Group climbed 3.6%, 3.2% and 1.8%, respectively. Nedbank Group, FirstRand and Standard Bank Group advanced 3.4%, 3.0% and 1.7%, respectively. However, Redefine International fell 0.6%, after its CFO, Andrew Rowell, tendered his resignation. The JSE All Share Index climbed 1.6% to close at 50,254.08.
UK Market Review
UK markets finished in the green yesterday, with the benchmark index rising for an eight consecutive day to post its longest winning streak in 10 months. Royal Mail advanced 4.6%, following the collapse of its major rival, City Link, which would potentially open new opportunities for the firm. Smith & Nephew rose 1.7%, extending previous session gains, amid reports that US firm Stryker was planning to launch an acquisition offer for the company. BG Group climbed 1.0%, after it shipped its first cargo for LNG from its Queensland’s Curtis Island project. Bucking the trend, BT Group fell 2.7%, after the firm went ex-dividend. The FTSE 100 Index advanced 0.4% to close at 6,633.51.
US Market Review
US markets ended mixed yesterday. Range Resources, QEP Resources and Southwestern Energy climbed 2.6%, 2.1% and 1.9%, respectively, despite a decline in crude oil prices. Walgreen rose 0.4%, after its shareholders approved the company’s proposal to acquire the remaining stake in Alliance Boots GmbH. However, Google fell 0.8%, after China blocked access to Gmail services through third-party applications. QUALCOMM dropped 0.8%, after reports revealed that the company’s patent licensing business as well as its worldwide contracts with Apple and Samsung might come under global scrutiny. The S&P 500 Index rose 0.1% to settle at 2,090.57, while the DJIA Index dropped 0.1% to close at 18,038.23. The NASDAQ Index remained flat to finish at 4,806.91.
Asia Market Review
Asian markets are trading lower this morning, as crude oil prices continued to decline and amid concerns over political situation in Greece. In Japan, Sony Corp., Panasonic Corp. and Hitachi retreated 2.5%, 1.5% and 1.4%, respectively. In Hong Kong, Huadian Power International plunged 6.5% while Hong Kong-based Kerry Logistics Network slipped 0.3%, after it stated that it would purchase a 70.0% stake in Dubai-based Able Logistics Group. In South Korea, energy sector stocks, SK Innovation and S-Oil dropped 1.1% and 0.1%, respectively, tracking the movement in crude oil prices. The Nikkei 225 Index is trading 0.8% lower at 17,584.98, while the Kospi Index is trading 0.7% lower at 1,914.17. The Hang Seng Index is trading 0.8% in the red at 23,574.93.
At 06:00 SAST today, Brent crude oil fell 0.3% to trade at $56.11/bl. A Bloomberg News survey revealed that crude inventories in the US are projected to remain at 387.20mn bls last week. Meanwhile, reports revealed that oil production in Libya has fallen below 300.00Kb/d, after Islamist militants attacked on the nation’s key energy facilities. Yesterday, Brent crude oil fell 2.7% to settle at $56.29/bl, amid concerns over a supply glut in the global oil market.
Yesterday, the Illinois North Central No.2 Yellow corn spot prices remained unchanged at $3.84/bushel.
At 06:00 SAST today, gold prices advanced 0.4% to trade at $1,187.44/oz. Yesterday, gold declined 1.1% to close at $1,183.29/oz., after the US dollar gained ground against the majors.
Yesterday, copper rose 0.2% to close at $6,371.00/mt. Aluminium remained flat at $1,833.50/mt.
Yesterday, the South African rand weakened against the US dollar. Later today, market participants will keep a tab on South Africa’s trade data and the US consumer confidence report for further direction.
The yield on benchmark government bonds fell yesterday. The yield on 2015 bond fell to 6.49% while that for the longer-dated 2026 issue declined to 8.02%.
At 06:00 SAST, the US dollar is trading 0.1% lower against the South African rand at R11.6186, while the euro is trading 0.2% lower at R14.1046. At 06:00 SAST, the British pound has remained flat against the South African rand to trade at R18.0308.
Yesterday, the euro remained mixed against its major counterparts. The third voting round for the Presidential elections in the Greek parliament failed to elect a candidate, calling in for an early elections next year. Later today, In the UK, traders will eye Nationwide’s house price survey for December later today for further direction in the British pound-South African rand pair.
At 06:00 SAST, the euro slipped 0.1% against the US dollar to trade at $1.2139, while it has weakened 0.2% against the British pound to trade at GBP0.7822.
The UBS consumption indicator in Switzerland dropped to 1.29 in November from a revised reading of 1.32 reported in October.
Greece is heading for an early elections on 25 January 2015 after parliament failed to elect a new president in a third and final round of voting yesterday. The outcome of the election revealed that, Stavros Dimas, the former European Commissioner and the only candidate in the presidential race, secured 168 votes, 12 short of the required majority to win.
The consumer confidence index in Italy dropped unexpectedly to a reading of 99.70 in December from a reading of 100.20 posted in November.
The Dallas Fed manufacturing business index in the US fell to 4.10 in December from a reading of 10.50 recorded in November.
The CB leading index in China dropped to 99.17 in November from a revised reading of 99.37 registered in October.
Sun International Limited: The company indicated that its proposed acquisition of a material shareholding in GPI Slots is now unconditional, following an agreement to waive the Mpumalanga Gambling Board approval, which will now be obtained post the implementation of the acquisition.
Redefine International Plc: The company indicated that its Chief Financial Officer, Andrew Rowell, has tendered his resignation as a director of the company in order to take up a similar role abroad.
Van Eck more than doubles its stake in Harmony Gold: Van Eck Associates Corporation’s decision to more than double its stake in Harmony Gold Mining Co. suggests an improvement in investment funds’ outlook for miners of the metal after stock prices plunged, according to SP Angel Corporate Finance LLP.
UK and US
Bridgeline Digital: The digital solutions provider, in its FY14 results, stated that its total revenue dropped to $23.74mn from $24.51mn posted in the earlier year. Its basic and diluted net loss per share increased to $0.32 from $0.23 recorded in the prior year.
Google: Media reports revealed that the company’s Gmail was completely blocked in Beijing, with an anti-censorship advocate, GreatFire.org, indicating the so-called Great Firewall was to blame.
Walgreen: The company announced that its shareholders have approved its plans to acquire the rest of European drugstore chain, Alliance Boots GmbH, and the subsequent reorganisation into a holding company structure.
Canadian Solar: The company announced that its wholly owned subsidiary, Canadian Solar Solutions, has closed the sale of the Liskeard 1 solar power facility, totalling 10.00 MW AC to TransCanada Corporation, for a consideration of approximately $52.00mn.
Repros Therapeutics: The company revealed that a federal judge in Texas has issued a definitive ruling in favour of the company suggesting that the former is the sole and rightful owner of the Androxal patents. Moreover, the company, in its update for the regulatory status of its new drug application for Androxal, stated that it submitted a complete response to the guidance that the Food and Drug Administration (FDA) provided and expects its contract research organisation to file the New Drug Application (NDA) in 1Q15. Additionally, the company announced that it has initiated two Phase 2B efficacy studies of Proellex in the treatment of uterine fibroids in women that experience heavy vaginal bleeding as a result of these benign tumours.
Jinpan International: The company announced that it has received a letter from FNOF E&M Investment Limited and the former’s Chairman, President and CEO, Mr. Zhiyuan Li, that they have withdrawn their preliminary non-binding proposal to acquire all of the outstanding shares of the company.
Netlist: The company revealed that the US Patent and Trademark Office has denied petitions requesting Inter Partes Review of the former’s patents asserted against the ULLtraDIMM.
BG Group: The natural gas company indicated that it has loaded the first cargo of liquefied natural gas from its Queensland Curtis LNG project in Australia, and would be loading the second cargo in the first week of January 2015.
EVRAZ Plc: The company announced that its North American subsidiary, EVRAZ North America, has closed the renewal and amendment of its asset-based revolving credit line (ABL). The new facility is $515.00mn and has the same interest rate conditions as the previous ABL, which was inked in December 2011.
Venture capital funding of London tech start-ups doubles: London-based technology start-ups attracted record levels of venture capital in FY14, with investors ploughing $1.40bn into the city’s fledgling companies — double the amount raised last year.
Jon Moulton in spotlight as City Link collapses: When asked for his three best features in an interview four years ago, Jon Moulton told the Financial Times: “Determination, curiosity and insensitivity — it lets you sleep when others can’t.” The latter quality may now come in handy for the private equity veteran. He has been heavily criticised after City Link, the parcel delivery company owned by his Better Capital vehicle, fell into administration on Christmas Eve and put 2,760.00 jobs at risk.
UK-listed silver miner approves share award: Hochschild Mining has approved a share award to its Chief Executive and several senior managers, citing concerns about staff retention following a cost-cutting programme at the UK-listed silver miner.
Network Rail Chief calls for work review: The head of Network Rail has conceded that there needs to be a new approach to the timing of engineering works after botched track upgrades caused chaos for thousands of passengers.
Better Capital to recoup up to GBP20.00mn from City Link collapse: The private equity owner of collapsed delivery company City Link has said it stands to recoup up to GBP20.00mn of its investment even as it relies on the taxpayer to fund redundancy payments for nearly 3,000.00 staff.
TalkTalk emerges as potential Blinkbox buyer: TalkTalk has emerged as the frontrunner to acquire Blinkbox, Tesco’s lossmaking video streaming service. A deal could be announced as soon as next week, when Dave Lewis, the new Chief Executive of Tesco, unveils his strategy for turning round Britain’s biggest retailer and shoring up its balance sheet.
Canadian fund raises Birmingham airport stake: One of Canada’s largest pension funds has increased its stake in Birmingham airport to almost 50.0% after it announced record-breaking passenger numbers.
Sky and BT: grudge match: From January, the reigning champions of televised football, Sky, face upstart BT in a contest worth billions of British pounds for the rights to televise the English Premier League. Well, gents, Sky needs a win in this London match. BT are flying after snatching away a quarter of the live football matches per season in their last meeting on this ground in FY12. All I know is you can’t win anything with kids. Sky will want to hold the line at the number of games they now cover: 114 games per season. Otherwise, the key is how they defend. If you can’t protect your goal, you’re nothing. Sky may well have to park the bus and just bid for the minimum: the key Sunday games. Sky’s manager, Jeremy Darroch, does have plenty of experience in this league. And that counts for me. Thanks, gents. It seems that content remains key to keeping the fans happy. For now BT has the money to make its owners’ dreams come true. Sky may need to find a richer partner. The game is changing.
Keystone pipeline: carbon nation: In the US there are 185,000.00 miles of petroleum pipelines. Most attract little or no attention. The 1,800.00-mile Keystone XL pipeline is another story: it is a story about US Gulf Coast refiners who would like to use heavier grades of crude oil. That heavier oil would come from the oil sands region of Alberta in Canada. Supporters of the new pipeline, including owner TransCanada, say that thousands of jobs will be created to build the pipeline and help move the oil, reducing American reliance on the Middle East and Latin America. The US already imports more from Canada than any other country, 2.80Mb/d. But a vocal opposition hates the idea of promoting more oil production from the Canadian oil sands, which are regarded as a high emitter of greenhouse gases. However, stopping the new pipeline route will not stop the production in the oil sands nor the greenhouse gas emissions. The oil will continue to come through current routes and via rail, which poses its own environmental threats. By November last year, 180,000.00Kb/d entered the US from Canada via rail tankers. The US, one way or another, will get its oil.
CEOs and Chairs: hot seat: Winston Churchill was right about democracy: it is the worst form of government, except for all the others. What might the Prime Minister have said about corporate governance? He would surely have a found a way to tweak academic consensus, which is that separating the roles of board Chairman and Chief Executive is a bad idea, except when compared with keeping them together. The argument against separation is that it undermines the authority of the company’s leader. That is, the CEO/Chair gets the trains running on time. The counter-argument is that lack of oversight leaves bad decisions unchecked. Bank of America’s decision in October to give the Chairman role to Brian Moynihan, its Chief Executive, reignited this debate. JPMorgan, where Jamie Dimon has both roles, performed well during the crisis, but admitted to violating securities laws in the “London Whale” case. Meanwhile, Citigroup, with a divided structure, was among the worst hit during the crisis. Would a different structure have had a material effect in either case? Separating the roles is an easy box to mark on a governance checklist. It is harder to assess whether a Non-Executive Chair has a backbone; or whether the board members are qualified and vigilant. But the quality of the board as a whole is at least as important as whether or not the Chief Executive chairs it. Churchill was no box-ticker. Neither should investors be.
*Published with special permission by Anchor Capital (ACG)
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