Trading update : 10 March 2025

Flip floppers

President Donald Trump’s flip flopping on tariffs is wreaking havoc on markets by sowing policy uncertainty. The White House is now exempting automakers from newly imposed tariffs on Mexico and Canada for one month following pleas from industry leaders, and is also considering exempting certain agricultural products from tariffs imposed on its two neighbouring countries.

Cost cutting

Quilter (QLT-JSE) beat market expectations with adjusted operating profit of £196 million for the 2024 financial year, which is up 17.4% year-on-year (y/y) mainly due to lower underlying operating expenses. The company declared a dividend of 5.9p, up 13% y/y, which also beat expectations. The management team expects “a mid to high single digit increase” in the 2025 financial year.

Going for growth

China’s government is shifting its economic focus from investment-led to consumption-led growth, with Premier Li Qiang declaring “vigorously boosting consumption” as the top priority in 2025. The need to reduce China’s economic reliance on external demand, address growing trade tensions with the US, and boost domestic demand and economic growth are the factors driving the shift, according to Bloomberg report. China has set an economic growth goal at about 5% for 2025, with a fiscal deficit target of around 4% of GDP. This growth target is seen as ambitious and will likely require aggressive stimulus, with economists forecasting a growth rate of 4.5% in 2025.

Anti-America sentiment

Several Canadian provinces have taken American liquor off store shelves in response to tariffs imposed by the Trump administration. CNBC reported that Lawson Whiting, CEO at Jack Daniel’s maker Brown-Forman (BF.B-NASQ), said the actions were “worse than a tariff” and “disproportionate”. Several other countries are also suggesting that consumers avoid buying American goods as an answer to Trump’s policies.

Europe’s  “whatever it takes” moment

The old continent is waking up in response to the unfolding global crisis. Bloomberg writes that Europe, with its market of 500 million people and a GDP similar to that of the US, is facing its  “whatever it takes” moment. With 57% of global foreign exchange reserves in US dollars and only 20% in euros, a weakening greenback should provide a massive tailwind for the euro. Investors are also starting to imagine a financial system without the US at its centre. If the EU could seize this moment, it would tap in to a deep well of willing buyers keen to trim US exposure. “Plenty of reserve managers could shift very quickly,” said Mansoor Mohi-uddin, chief economist at Bank of Singapore in a Financial Times article. There is also massive stimulus on its way in Europe, beyond the Ukraine rebuild project, with Germany’s Bundesbank recommending loosening constitutional borrowing limits to free up €220 billion of fiscal space through 2030 for infrastructure and military spending.

Deregulation spurs EU

In another example of how deregulation in the EU is supporting markets, PGM stocks performed well after EU lawmakers gave carmakers two extra years to meet 2025 emission standards. PGM stocks will move in lockstep to a rebound in European markets due to lower battery EV penetration than China. Europe is already the largest consumer of PGMs while the automotive sector is yet to recover to pre-pandemic levels, which means there is good upside from pent-up demand.

Attack of the AI bots

Naspers (NPN-JSE) and Prosus (PRX-JSE)-owned Tencent Holdings’ Yuanbao AI chatbot passed DeepSeek to become the most downloaded iPhone app in China. Tencent’s app integrates its in-house Hunyuan AI tech alongside DeepSeek’s R1 reasoning model and has taken over at a time of acute interest and competition around AI in the country. According to a Bloomberg report, three of the top five most downloaded free apps are AI bots.

Multichoice, Canal+ extend long-stop date

Hold onto your Multichoice (MCG-JSE) shares, the deal’s not done yet. The media company and its suitor, Canal+ agreed to extend their transaction long-stop date by six months to 8 October as they wait for regulatory approval amid ongoing delays for merger control clearance.

SA GDP eeks out modest rise

Headline GDP in South Africa increased by a modest 0.6% in the fourth quarter of 2024 when measured on a quarter-on-quarter seasonally adjusted (QQSA) basis. This was below expectations, according to Bloomberg. GDP growth for the year grew by just 0.6%, which reflects a largely subdued economy that continues to face numerous challenges, notably on the logistics front.

Two-pot bonanza

Data from SARS confirms that total withdrawals from 2.4 million retirement fund members totalled R43.4 billion at the end of January 2025, which was a significant increase from the 2.1 million members who had withdrawn R35.1 billion by mid-November last year. With the two-pot bonanza fuelling retail activity, the country will require structural reforms, an increase in GDP growth and job creation to sustain momentum.

Stock focus: Nedbank Group

Nedbank Group (NED-JSE) delivered a solid set of results for the 2024 financial year, and provided a strong outlook. Headline earnings grew 8% to R16.9 billion and return on equity of 15.8% was well ahead of market expectations driven largely by earnings growth.

Sector focus: Automotive

New car sales in SA continue to show positive momentum in February, rising 7%, with new passenger sales up 17%. While the bakkie and taxi category is still struggling (-11%), imported brands rose 20%. Suzuki sales jumped +16% and Motus (MTH-JSE) brands are catching fire again, with Hyundai up +22%, Kia +29%, and Renault +11%, which is promising for earnings for the second half of the financial year.