The Traders' Update, 9-10 May 2024
Realeboha Molaba
Actuarial Junior Consultant; Actuarial Science Honours Graduate from the University of Cape Town; Actuarial Science and Mathematical Statistics Graduate from the University of the Witwatersrand
Segment 1: Overseas Markets
European Markets
Equity markets closed mostly higher on Thursday as investors digested more earnings reports and central bank news, i.e.:
The pan-European Stoxx 600 closed 0.20% higher with oil and gas stocks closing 0.90% higher to lead the gains. Autos stocks bucked the trend to close 0.90% lower.
On the individual shares front, Spanish telecom firm Telefonica shares closed higher after the company reported a 79% jump in its first-quarter net profit to €532 million (US$571 million). Thus both net profit and revenue exceeded market expectations and the company declared a cash dividend of €0.30 to be paid from December 2024 to June 2025.
Spanish bank BBVA presented a hostile takeover offer of rival bank Banco Sabadell to shareholders, after an all-share merger was rejected three days ago. Thus the bank maintained its offer of one BBVA share for every 4.83 Sabadell share, which represents a 30% premium over both banks' closing prices. The merger deal is valued at roughly €12 billion (US$12.9 billion).
The Bank of England reported that it kept its benchmark lending rate unchanged at 5.25% for the sixth consecutive meeting, in line with market expectations. However, more policymakers voted for a rate cut than compared to the number of policymakers who voted at the last meeting.
Asia-Pacific Markets
Hong Kong
The Hang Seng closed 1.22% higher at 18,537.81.
China
Official trade data showed that April's imports rose by 8.4% year-on-year, against an estimate of 4.8% while exports rose by 1.5% year-on-year and thus being in line with market expectations.
Mainland markets closed higher, i.e.:
Japan
Government data showed that real wages in March fell by 2.5% year-on-year and hence marking a 25th consecutive month of declines. However, nominal wages rose by 0.60% year-on-year but the rising cost of living outpaced the rate at which wages are increased.
Automaker Mitsubishi Motors Corp shares initially fell after the company reported that it forecasts lower earnings for the current fiscal year. Furthermore, the company stated that it expects a net profit of JP¥144 billion (US$930 million) in the fiscal year ending March 2025 and is 7% lower than that reported in the last fiscal year.
Broader markets closed mixed, i.e.:
South Korea
Markets closed lower, i.e.:
Singapore
The Straits Time Index closed 0.04% higher at 3,265.95.
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Australia
The S&P/ASX 200 closed 1.06% lower at 7,721.60.
U.S. Markets
Equity markets closed higher as investors digested initial unemployment claims data, i.e.:
Real estate investment trust (REIT) Equinix shares led the gains in the S&P 500 after the company released its quarterly earnings report which showed that the data center operator reported better-than-expected adjusted earnings before interest, taxes, depreciation and amortization (EBIDTA). Adjusted funds from operations (AFRO) for the period were also better than expected as they were boosted by solid demand growth for artificial intelligence (AI) products.
Utility company NRG Energy shares rose after the company reported its quarterly results which showed that free cash flow before growth declined on an annual basis. However, BMO Capital analysts upgraded their price target on the stock due to a revaluation based on the relative performance of industry peers.
Provider of sterilization products and services for health care providers Steris shares rose after the company announced a targeted restructuring of the business. The restructuring will focus on the European surgical business including product rationalizations and facility consolidations. The company still intends to divest its dental business.
Software developer Epam Systems shares reported the steepest decline in the S&P 500 after the company released poorer-than-expected sales and profit guidance for the current quarter and full year. Even though first-quarter profits exceeded estimates, the company's disappointing outlook reflects unexpected market conditions and a tough demand environment.
Corporate payments firm Corpay shares fell after the company reported that it will be acquiring Paymerang (which is a provider of accounts payable automation solutions). The company supported that the acquisition would assist in enhancing its position in the education, healthcare, hospitability and manufacturing sectors.
Short-term rental platform Airbnb shares fell after the platform released a disappointing current quarter outlook. Even though the company's sales, profit and gross booking results beat estimates, the company noted that the timing of Easter, the additional leap-year day in February and foreign exchange fluctuations could weigh heavily on its subsequent results.
The U.S. Department of Labor reported that initial unemployment claims for state benefits rose to their highest level since August 2023 and thus increased by 22,000 to 231,000 for the week ending May 4.
Segment 2: African Markets
Zambia
The International Monetary Fund (IMF) reported on Thursday that will continue to meet with government officials over discussions to unlock the next disbursal from a US$1.3 billion, three year loan programme.
Nigeria
The IMF affirmed its forecast of the country's expansion of 3.3% in the current year, up from the 2.9% reported in the last year. The IMF cited that there should an uptick in the services and trade sectors even though the soaring food price inflation continues to threaten food security.
Kenya
Telecommunications operator Safaricom reported a 3.5% year-on-year increase in its annual core earnings to 94.9 billion Kenyan shillings (US$724 million) due to strong growth in its home market. The company also operates in the Ethiopian market and thus experienced higher than expected costs from operating in the region. Furthermore, the company is partly owned by South African telecommunications giant Vodacom and British telecoms giant Vodafone.
Segment 3: South African Markets
Business Leadership states that the government's newly drafted Gas Master Plan will fail to address the urgent issue of the country's falling natural gas supply. The current main source of supply are two gas fields operated by Sasol in Mozambique and it is expected from mid-2026 that Sasol will not be supplying South African clients with gas. It will be using the remaining supply of gas for itself.
The 2023 auto trade balance increased by 7.6% to R21.1 billion (US$1.14 billion) and thus was driven by record vehicle exports. The sector is important in the country's manufacturing industry as it contributed 21.9% to local manufacturing output and 5.3% to national GDP.
The Rand still remains under pressure due to global risk aversion and delayed interest rate cuts. Economists expect that a positive election outcome after 29 May will contribute positively to the value of the volatile national currency and this comes on the back of the U.S. Fed delaying anticipated rate cuts.
Audit firm PwC reported that foreign direct investment (FDI) inflows in 2023 totaled around R100 billion (US$5.41 billion) and is approximately equal to 5.41% of the country's GDP. This is despite foreign perceptions on the country's public governance and business environment continuing to deteriorate.
Segment 4: JSE Market Morning Update