Trading update : 7 February 2025

From emerging market jitters to cocoa crises, markets are taking investors for a wild ride, especially as Trump’s trade tactics keep everyone guessing. Positive economic indicators (new car sales and stronger growth forecasts) bode well for SA Inc. and Boxer keeps punching above its weight, but warning lights are starting to flash on inflation.

Investors dump EM ETF

Investors dumped broad-based exchange-traded funds (ETFs) that buy emerging-market stocks in January, driving outflows as traders cherry-pick country-specific bets as global uncertainty rises due to US President Donald Trump’s policies. Bloomberg reported that the $16 billion iShares MSCI Emerging Markets ETF (EEM-NASQ) recorded $1.4 billion in withdrawals in January alone, the biggest monthly redemption since August.

China tariffs ding US car industry

President Donald Trump’s decision to put 10% in additional tariffs on imports from China will affect a small number of US vehicle makers, but the increased costs of auto parts could affect already high car prices. According to data shared by CNBC, the US has imported $15.4-17.5 billion worth of transportation goods from China annually in recent years, citing U.S. International Trade Commission data.

World Bank lifts SA GDP forecast 

The World Bank thinks the South African economy will grow faster than previously expected thanks to a sustained recovery at Eskom and in the logistics sector. However, the bank warned that the country will struggle to achieve the level of growth needed to reduce poverty and unemployment. The bank boosted its GDP growth projection for 2025 to 1.8% (from 1.3%), according to its South Africa Economic Update report, and expects growth to accelerate to 2% by 2027.

EU trade war off, for now

The European Union (EU) was preparing for a transatlantic trade fight, with the European Commission, the EU’s executive arm that’s in charge of trade matters, preparing a proportionate response to the tariff threats that would not escalate matters. However, President Trump’s decision to delay implementing tariffs on Mexico and Canada raised hopes that it’s possible to find a more acceptable deal.

US rates likely on hold

Federal Reserve Vice Chair Philip Jefferson said it’s appropriate to take a cautious approach when adjusting interest rates, as long as the economy and labour market remain strong. In a Bloomberg article, Jefferson said: “I continue to see a gradual reduction in the level of monetary policy restraint placed on the economy as we move toward a more neutral stance as the most likely outcome.” Expect rates to stay on hold for now.

World going cuckoo for cocoa

Mondelez International (MDLZ-NASQ) said “unprecedented cocoa cost inflation” would drive down core earnings in 2025 by approximately 10%. Multiple factors, including climate change, the El Niño climate phenomenon, crop diseases, and ageing trees, have led to a significant decline in global cocoa production while global demand keeps rising. Global supply chain constraints have also driven up prices.

Red flags for SA inflation

Rising input costs threaten to push inflation in South Africa in the wrong direction. Labour costs are rising as the country’s minimum hourly wage will increase by 4.4% to R28.79 from March, while the retail price of 93- and 95-octane petrol increased by R0.82 a litre and diesel rose R1.05 a litre in February. These increases marked the fourth consecutive month of fuel price increases.

Multichoice and Canal+

The public now has more info on the proposed Multichoice restructuring needed to get around regulatory requirements and get the Canal+ deal over the line. The group will unbundle the SA broadcasting license holder, ensuring this entity has the required BEE credentials to pass regulatory muster. In the statement, Canal+ and MultiChoice said they “are confident that the envisaged structure meets the requirements of all applicable laws, including the restrictions on foreign ownership and control of broadcasting licences contained in the Electronic Communications Act, 2005.” The next major hurdle is the competition commission deadline, which was extended to 21 February 2025.

NHI breakthrough

The ANC has agreed with the DA not to ‘collapse’ medical aids as part of the envisaged and controversial NHI. Planning, Monitoring and Evaluation Minister Maropene Ramokgopa was quoted by News24 as saying the impasse with the DA on the NHI is now a thing of the past. Both parties agreed to drop sections of the law that could collapse medical aids, which is good news for the likes of Discovery (DSY-JSE).

Stock focus: Boxer

Boxer (BOX-JSE) year-to-date sales rose +11.4% and the retailer is maintaining strong momentum, with everything on track to meet its expected Superstore rollout plans this financial year. While the liquor store rollout has been delayed by license issues, the outlook for this stock on a rampage remains bullish.

Sector focus: Motor vehicles

New car sales for January – which offers an important insight into consumer sentiment – is on the up and up. Chinese and Indian vehicles are still all the rage, according to the latest new vehicle sales data from Naamsa. Suzuki hit an all-time record and pipped VW to second place. Overall numbers are really good, too. Total new car sales were up +10% and passenger new car sales jumped +18%. Suzuki was on fire, rising +22%, with Haval, Chery and Mahindra rising a combined +36%. The Motus (MTH-JSE) portfolio was not far behind at +13% to the good, with Hyundai surging +26%!