By Anchor Capital
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South African Market Review South African markets closed in the green on Friday. Kumba Iron Ore, Exxaro Resources and African Rainbow Minerals climbed 10.9%, 7.8% and 5.6%, respectively. Platinum mining sector stocks, Northam Platinum, Impala Platinum Holdings and Anglo American Platinum advanced 3.2%, 2.6% and 1.7%, respectively. Ascendis Health gained 1.4%. The healthcare company announced that its Chief Financial Officer, Robbie Taylor, has resigned with effect from 30 June 2015. Massmart Holdings added 1.3%, after it announced that its total sales in the 13 weeks to March rose 9.5% from a year ago. However, gold miners, Harmony Gold, AngloGold Ashanti and Gold Fields fell 2.3%, 2.3% and 2.1%, respectively. The JSE All Share Index rose 0.9% to close at 55,188.34. |
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UK Market Review UK markets finished higher yesterday, with the benchmark FTSE 100 index boosted by a rise in shares of Standard Chartered and HSBC Holdings. Standard Chartered advanced 4.3%, amid speculation that it could move its home base out of London. HSBC Holdings gained 3.1%, after a report indicated that the lender was considering spinning off its UK retail bank in a deal valued at GBP20.00bn.Bucking the trend, retail sector stocks, Tesco and WM Morrison Supermarkets dropped 1.8% and 0.4%, respectively. BP ended 0.3% lower, after the UK government announced that it would oppose any potential foreign acquisition of the company. The FTSE 100 Index advanced 0.5% to close at 7,103.98. |
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US Market Review US markets ended lower yesterday. Applied Materials declined 8.4%, after the firm called off its $10.00bn takeover of Tokyo Electron due to regulatory concerns. Mylan dropped 5.7%, after the company’s board unanimously rejected Teva Pharmaceutical Industries’ unsolicited $40.00bn takeover offer. Laboratory Corporation of America Holdings slid 1.0%, as its 1Q15 revenue fell short of market expectations. However, QUALCOMM rose 1.5%, following a report indicating that the company has launched a unit to help Chinese smartphone makers sell their products overseas. The S&P 500 Index dropped 0.4% to settle at 2,108.92, while the DJIA Index fell 0.2% to close at 18,037.97. The NASDAQ Index declined 0.6% to finish at 5,060.25. |
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Asia Market Review Asian markets are trading mostly weaker this morning, tracking overnight losses on Wall Street. In Japan, Komatsu retreated 3.9%, after the company guided to a decline in its operating profit for FY16. However, Fanuc Corporation jumped 5.0%, after it stated that would increase its dividend by twofold and augment its share repurchase programme. In Hong Kong, PetroChina dropped 5.1%, after its FY15 operating profit trailed market forecasts. In South Korea, Samsung Engineering declined 2.7%, after Samsung Heavy Industries stated that it is not considering a merger with the company. The Nikkei 225 Index is trading 0.4% higher at 20,061.65, while the Kospi Index is trading 0.4% lower at 2,149.63. The Hang Seng Index is trading 0.1% lower at 28,407.31. |
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Commodities At 06:00 SAST today, Brent crude oil fell 0.9% to trade at $62.00/bl, ahead of the American Petroleum Institute’s (API) weekly report on US crude inventories for last week. Yesterday, Brent crude oil fell 1.7% to settle at $62.58/bl, offsetting signs of lower oil production in the US and ongoing concerns over the security of Middle East oil shipments due to violence in Yemen.Yesterday, the Illinois North Central No.2 Yellow corn spot prices fell 1.3% to $3.43/bushel. At 06:00 SAST today, gold prices declined 0.1% to trade at $1,200.95/oz. Yesterday, gold gained 2.0% to close at $1,202.15/oz, recovering from the previous session’s five-week low, ahead of the US Federal Reserve meeting later this week. Yesterday, copper rose 0.6% to close at $6,070.00/mt. Aluminium closed 0.2% higher at $1,846.75/mt. |
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Currencies Yesterday, the South African rand strengthened against the US dollar, after the preliminary data on Markit services PMI in the US fell more than market expectations in April. Going forward, South Africa’s private sector credit growth, producer price index and trade balance numbers, scheduled this week, will attract market attention. Investors look forward to today’s data on consumer confidence and S&P/Case-Shiller home price indices in the US, for further direction.The yield on benchmark government bonds were mixed yesterday. The yield on 2015 bond advanced to 6.08% while that for the longer-dated 2026 issue fell to 8.02%. At 06:00 SAST, the US dollar is trading 0.2% higher against the South African rand at R12.0277, while the euro is trading 0.1% higher at R13.0835. Yesterday, the euro weakened against most of the major currencies. Meanwhile, media reports revealed that the Greek government has handed the day-to-day duties of working with the creditors to its deputy Foreign Minister, Euclid Tsakalotos, replacing the Finance Minister, Yanis Varoufakis, following the failure to unlock additional aid in Friday’s eurogroup meeting. At 06:00 SAST, the euro slipped 0.1% against the US dollar to trade at $1.0877, while it has weakened 0.1% against the British pound to trade at GBP0.7143. |
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Economic Updates The Confederation of British Industry (CBI) has indicated that CBI trends selling prices dropped to -3.00 in April, in the UK, compared with a reading of 4.00 in the previous month. Market expectation was for CBI trends selling prices to fall to a level of 2.00.On a monthly basis, in Germany, the import price index advanced 1.0% in March, compared with an advance of 1.4% recorded in the previous month. Markets were expecting the import price index to climb 0.4%. The flash Markit services PMI registered a drop to 57.80 in April, in the US, compared with market expectations of a drop to a level of 58.80. Markit services PMI had recorded a level of 59.20 in the prior month. In April, the Dallas Fed manufacturing business index rose to a level of -16.00 in the US, compared with a reading of -17.40 in the prior month. Market anticipation was for the Dallas Fed manufacturing business index to climb to a level of -12.00. In March, on a monthly basis, large retailer’s sales fell 13.0% in Japan, compared with an advance of 1.3% posted in the previous month. Market expectation was for large retailer’s sales to fall 11.3%. In March, on a monthly basis, retail trade unexpectedly fell 1.9% in Japan. Retail trade had climbed 0.7% in the prior month. The Conference Board has reported that the leading index advanced 0.5% on a monthly basis, in February, in Australia. In the previous month, the leading index had recorded a rise of 0.4%. |
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Corporate Updates South AfricaMassmart Holdings Limited : For the 13 weeks ended to 29 March 2015, the retail company indicated that same store sales increased by 7.4%, compared with 7.1% growth seen in the same period of the previous year. It stated that its total sales were up by 9.5% from the corresponding period of last year.The Bidvest Group Limited: The investment holding company stated that it has extended the closing date of the offer to acquire all the shares in Adcock Ingram Holdings to 18 May 2015, to provide Adcock shareholders with further time to make an assessment of the impact of the proposed Adcock black economic empowerment transaction. Ascendis Health Limited: The healthcare company announced the resignation of Robbie Taylor, its Chief Financial Officer and Director, effective from 30 June 2015. Suspended SAA CEO MonwabisiKalawe resigns: Suspended South African Airways CEO MonwabisiKalawe has resigned. Underlying investments boost Blackstar: Blackstar Group has lifted its net asset value by 23.0% to R1.60bn in the year to December, boosted by its underlying investments. Fierce strike sees closure of Argent’s Giflo unit: A violent and damaging labour dispute has forced JSE-listed conglomerate Argent Industrial to shut down its automotive component specialist, Giflo Engineering. Subsidiaries put Anglo Chief to test: Anglo American subsidiary, Kumba Iron Ore in its March quarter production update left its full-year production target intact and indicated that it would strengthen measures to cut costs. Another subsidiary, De Beers, indicated that output of diamonds would be scaled back by 2-million carats this year because of market weakness. AEEI aims to list two divisions: African Empowerment Equity Investments (AEEI), the former Sekunjalo Holdings – has identified its technology and marine business divisions as catalysts for growth and anticipates listing them in three to five years. Pioneer takes a slice of Futurelife: Pioneer Foods has entered into a joint venture with Futurelife Health Products as it looks to enhance its breakfast cereal offering. UK and US Apple Inc.: The technology company, in its 2Q15 results, indicated that its net sales increased 27.1% to $58.01bn from the same period a year ago. Its diluted EPS stood at $2.33, compared with $1.66 posted in the corresponding period of previous year. For 3Q15, the company stated that it expects revenue to be between $46.00bn and $48.00bn. General Growth Properties: The real estate investment trust, in its 1Q15 results, revealed that its total revenues dropped 4.6% to $594.14mn from the corresponding period of prior year. However, its diluted EPS from continuing operations increased to $0.66 from $0.06 recorded in the same period of preceding year. The company declared a common stock dividend of $0.17/share payable on 30 April 2015. AvalonBay Communities Inc.: The real estate company, in its 1Q15 results, indicated that its net income attributable to common stockholders increased to $208.14mn from $141.74mn recorded in the same period of last year. Its diluted EPS was $1.56, compared with $1.09 posted in the corresponding period of previous year. For 2Q15, the company expects EPS in the range of $1.03 to $1.07. Boston Properties Inc.: The self-managed real estate investment trust, in its 1Q15 results, stated that its total revenue was up 7.6% to $618.48mn from the corresponding period of last year. Its diluted net EPS stood at $1.11, compared with $0.35 recorded in the same period of previous year. The company indicated that it expects its diluted EPS to be in the range of $0.43 to $0.46 for 2Q15. Hartford Financial Services Group: The investment and insurance company, in its 1Q15 results, revealed that its core earnings were down to $452.00mn from $501.00mn recorded in the same period of preceding year. However, its net diluted EPS rose to $1.08 from $1.03 posted in the corresponding period of prior year. Roper Industries Inc.: The industrial company, in its 1Q15 results, indicated that its net sales were up 3.7% to $865.28mn from the corresponding period of last year. Its diluted GAAP EPS stood at $1.54, compared with $1.46 posted in the same period of previous year. For FY15, the company stated that it has raised its diluted EPS guidance to $6.75 to $6.95. Laboratory Corporation of America Holdings: The health care diagnostics company, in its 1Q15 results, stated that its total revenue climbed 25.3% to $1.79bn from the same period of prior year. Its diluted EPS was down to $0.01 from $1.31 reported in the corresponding period of previous year. However, adjusted earnings rose to $1.73 per share from $1.51 per share. The company indicated that its adjusted EPS is expected to be in the range of $7.55 to $7.90 in FY15, compared with $6.80 recorded in the preceding year. MasterCard Inc.: The financial services corporation announced that it has entered into an agreement to acquire Applied Predictive Technologies for $600.00mn, subject to customary purchase price adjustments. Mylan NV: The generic and specialty pharmaceuticals company announced that its board of Directors has unanimously rejected Teva Pharmaceutical Industries $40.00bn takeover offer. Applied Materials Inc.: The manufacturing company announced that is has agreed to terminate its Business Combination Agreement with Tokyo Electron, after the US Department of Justice advised the parties that the coordinated remedy proposal submitted to all regulators would not be sufficient to replace the competition lost from the merger. Centrica Plc: The utility company, in its interim management, stated that the group continued to trade in line with the guidance provided at the time of its FY14 preliminary results in February, with improved year-on-year profitability downstream expected to be more than offset by the impact of lower commodity prices on the upstream business. It indicated that the group remains committed to strengthening its balance sheet and in April concluded the issuance of EUR750.00mn and EUR450.00mn of hybrid securities. Playtech Plc: The gaming software development company, in its trading update for 1Q15, indicated that its total revenue increased 31.4% from the same period a year ago to EUR134.90mn. It stated that continued delivery on its strategy is supporting accelerated growth across all business areas with a strong focus on regulated revenues. The company added that its average daily revenue for the first 25 days of 2Q15 was up over 25.0% from 2Q14. Diageo Plc: Following the announcement by United Spirits Limited (USL) on 25 April 2015, the alcoholic beverages company stated that the board of USL has lost confidence in Dr Vijay Mallya continuing in his role as a Director and as Chairman and therefore the board of USL has called upon Dr Mallya to resign forthwith as a Director and as Chairman of the board and step down from his positions in the company’s subsidiaries. Royal Bank of Scotland Group: The banking company announced that it has entered into a definitive agreement with Mizuho Bank, a wholly-owned subsidiary of the Mizuho Financial Group, for the sale of a further portfolio of corporate loan commitments. It stated that the transaction is expected to be substantially completed by the end of 3Q15. CRH Plc: The building materials company announced that Maeve Carton, the Group Finance Director, would assume the role of group’s Transformation Director, commencing on 1 January 2016. Randgold Resources Limited: The gold mining company revealed that its Tongon gold mine in CĂ´te d’Ivoire is on track to achieve its production and cost guidance for 2015. Great Portland Estates: The property development and investment company and its joint venture partner, Aberdeen Asset Management, announced the sale of 95Wigmore Street for a price of GBP222.40mn reflecting a net initial yield of 3.4% and a capital value of GBP2,209/sq. ft. QinetiQ Group: The defence technology company indicated that further to its announcement on 27 January 2015, Steve Wadey has taken up the role of Chief Executive Officer. Londonmetric Property: The property company revealed that Metric Income Plus Limited Partnership, its joint venture with the Universities Superannuation Scheme, has exchanged contracts on the sale of its Lichfield retail park to Mayfair Capital’s MCCPT for GBP13.30mn, reflecting a NIY of 5.8% rising to 6.0% in June – 65.0% of the rental income benefits from future fixed or indexed uplifts. Financial Times Hedge funds short UK asset managers: Hedge funds have taken out multimillion-pound bets against the shares of some of the UK’s largest assets managers, wagering that their value will fall because of exposure to vulnerable emerging markets. Conduct and litigation charges a ‘way of life’ for British banks: The spectre of past scandals will continue to haunt British banks, according to Standard & Poor’s, which predicts conduct and litigation charges for the four biggest lenders will peak at almost GBP14.00bn this year before falling sharply. Rusal battles with LME on aluminium price: Rusal, the world’s largest aluminium producer has reignited its war of words with the London Metal Exchange, saying the LME has allowed financial speculators to distort prices. BHP Billiton faces A$522.00mn Australian tax dispute: BHP Billiton has revealed a A$522.00mn ($410.00mn) dispute with tax authorities in Australia after the miner faced scrutiny from lawmakers in the country over whether a marketing hub in Singapore helps it to reduce its tax payments. Shell and Total delay west Africa projects after oil price rout: Royal Dutch Shell and France’s Total have delayed multibillion-dollar offshore oil projects in west Africa as part of efforts to rein in costs and shore up cash flow following the collapse in crude prices. HSBC by the numbers: headquarters threat and what it means on tax: HSBC’s announcement that it is reviewing whether to keep its headquarters in the UK, more than two decades after moving to London from Hong Kong, puts the tax affairs of Europe’s biggest bank in the spotlight. Investor advisory group backs Peltz for DuPont board: Nelson Peltz, the activist investor, won the backing of an influential shareholder advisory group in his battle for a seat on the board of US chemicals company DuPont. Google considers shake-up of News service: Google is considering significant changes to its controversial Google News service to aid publishers that have been struggling to make money in the online world, according to one of the company’s senior Executives in Europe. Capgemini buys iGate of the US for $4.00bn: Capgemini has agreed to buy US-based iGate for $4.00bn, in an all-cash deal that would boost the French IT and consulting company’s exposure to the fast-growing US market. Shares sink after US DoJ scuppers $30.00bn semiconductor merger: Shares in Japan’s Tokyo Electron fell by 13.0% on Tuesday morning, the biggest intraday drop in six years, after US regulators’ competition concerns scuppered its planned merger with US rival Applied Materials. EE pays GBP400.00mn dividend to Orange and Deutsche Telekom: Britain’s largest mobile operator EE paid shareholders Orange and Deutsche Telekom more than GBP400.00mn last quarter ahead of its sale to BT that is expected before the end of its financial year. Countryside blames UK election doubts for planning delays: Falling planning consent approvals in the run-up to the general election are hampering efforts to ease Britain’s housing crisis, Countryside has warned. Staffline completes GBP34.50mn deal for A4E: A4E, the welfare-to-work programme provider, has been sold for GBP34.50mn, generating a GBP20.00mn windfall for founder Emma Harrison, the Prime Minister’s former “families champion”. Atlas Mara to extend reach into Rwandan banking: Atlas Mara, the Africa-focused financial services vehicle spearheaded by former Barclays Chief Executive Bob Diamond, is venturing further into Rwanda. Standard Chartered: Edged up 4.3% to GBP11.16 a day ahead of results GlaxoSmithKline: Rose 1.8% to GBP15.62 on a recap of speculation that Pfizer might be interested in a bid. |
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Lex Raytheon: shooting for growth: Sin stocks mock the virtuous by outperforming the market over time. One subset of sin doing particularly well recently: weapons merchants (or, if you prefer, defence contractors). The shares of the biggest – Lockheed Martin, General Dynamics, Northrop Grumman, Raytheon – have all doubled the return on the S&P 500 over the past two years, and have whipped that index over a decade, too. Instead, Raytheon is trying cyber security. It is the largest missile maker in the world; its revenues have fallen every year since 2010. But the missile business is not bouncing back soon: Raytheon is targeting FY15 sales of $22.60bn, 10.0% below FY10 levels. Raytheon’s enlarged cyber products division will account for just 2.0% of revenues. Still, Barclays estimates the cyber division could contribute 40 basis points of earnings per share growth, which is enough to matter. The issue is cost: the deal valued Websense of six times revenues. When growth comes at that price, profitable stagnation looks appealing.Chindia: sprint finish: China and India are diverging again. Since the beginning of March, the MSCI China index is up one-fifth; MSCI India is down nearly one-tenth. Institutional investors have been unprepared for China’s stock market rally. Asia fund managers are very overweight India, but only slightly ahead of benchmarks in China, on EPFR and MSCI data. Notably, as China’s rally has advanced, China country funds have had net outflows in all but two weeks of this year. Citi says that there is less global money invested in China now than at the start of 2012. India has one-tenth more than then. This is partly down to the constituents: MSCI China includes stately Hong Kong-listed shares such as PetroChina, Bank of China, Lenovo and Haitong Securities, but not racy Shanghai and Shenzhen-listed A shares, which have simply exploded. Still, Citi notes that MSCI China earnings are 58.0% above their 2008 peak. India’s earnings, meanwhile, are only 6.0% up from pre-crisis levels. This suggests that investors are increasingly scared about the rally in China. The more fear there is, the more likely it is that institutions will delay investing – until they have to capitulate and play catch-up. China shares have further room to outrun India. Applied Materials: chips fall where they may: Applied Materials, the US semiconductor equipment group, announced a $3.00bn repurchase plan on Monday. However, it was introduced to ease the sting of losing the $9.00bn acquisition of Tokyo Electron, disclosed at the same time. The companies concluded, 19 months after announcing their tie-up, that they could not satisfy the US Department of Justice, which believed the deal would reduce competition. Applied Materials shares lost 7.0% on Monday, reducing its market value by nearly $2.00bn. From the start, the Applied Materials/Tokyo Electron deal was a bold play, combining two of the largest chip equipment makers. The larger US company would be acquiring a Japanese stalwart but the two pointed to the “spirit” of a merger-of-equals, making the deal more acceptable in Japan. After a stock swap, shareholders of Applied Materials would own 62.0% of the company. The new company to be called Eteris, was then to reincorporate in the Netherlands where its tax rate of 17.0% would be lower than Applied Materials’ 22.0%. By FY17, the pair said that cost savings would have totalled $500.00mn or about 15.0% of the combined company’s operating expenses. Operating margin was to reach 25.0%. Applied Materials still faces plenty of challenges. Semiconductors remain a notoriously cyclical industry. Consolidation among the company’s chipmaking customers has picked up substantially in the last several months. But for now, a cheaper stock translates into a more effective buyback. |