According to Goldman Sachs Group Inc.’s trading desk, a flood of cash from passive equity allocations will pour into the stock market in early July, setting up a continuing rally through the early summer. Since 1928, the first 15 days of July have been the best two-week trading period of the year for equities, and with the rally typically fading after July 17.
Corporate default rates in Europe rising
Corporate default rates are rising on the back of decade-long interest rate highs as central bank action to tame inflation has put an abrupt end to an era of inexpensive credit. Companies that are already highly indebted are at the highest risk, so pick stocks wisely!
The growing case for manganese
Cobalt, nickel and lithium are in-demand metals for EV batteries but manganese is a potential alternatives to lithium batteries. Interest around manganese in for use in the EV race is rising as it is cheaper to mine than lithium and there is much more of it available. In addition, there are also issues associated with cobalt mining, and most mined nickel is unsuitable for use in EVs. According to a Euronews report, Tesla (TSLA-NASQ) and Volkswagen are two of the most prominent companies exploring the use of manganese batteries at the moment, with Elon Musk recently having gone on record to say that manganese batteries have “potential” to drive the global transition. This is a potential hyper growth trend as the automotive industry has entered a fiercely competitive phase in the EV transition. Tesla, Hyundai-Kia and General Motors (GM-NASQ) now offer EVs with more than 480 km of range for less than the cost of the average new vehicle sold in the US, according to an analysis by Bloomberg Green. The most affordable is Hyundai’s 2024 Ioniq 6, which comes with 361 miles of range and a price tag that’s 25% below the national average of roughly $47,000. The largest mining companies with some exposure to manganese include Assmang (Part-owned by ARM Ferrous – ARI-JSE), BHP Billiton (a BHP Group company – BHPL-NASQ), and South32 (S32-JSE).
Investor exodus shallows SA capital markets
In its recently released Financial Stability Review, the South African Reserve Bank (SARB), sustained capital outflows from South Africa’s bonds and equities have hurt the depth and liquidity of its markets and may have repercussions for efficient pricing. It’s also reduced diversification options to both borrowers and investors, and may affect investor returns and the cost of funding.
Stock focus: Spar
Spar (SPP-JSE) is tracking ahead of consensus expectations, with guidance showing H1FY24 diluted HEPS from continuing operations improving from -13 to -3% YoY, and expectations for a stronger H2 given that the KZN distribution centre SAP implementation issues are still impacting the local operation for the first half of H1). Importantly, Spar has classified Poland as a discontinued operation. Spar will provide an update on the disposal at the results presentation, with expectations that the company passed an impairment of c.R830m on the Polish assets. From a debt perspective, all financiers “remain supportive of the group and have agreed to amendments to banking covenants.”
Don't underestimate a rand rally
In currency trading news, Barclays strategists, including Mitul Kotecha, believe markets are underestimating the potential for a significant rand rally in the event of an ANC-DA coalition, which could form by the end of this week. In an emailed note, Barclays targets the South African rand ZAR near R18.00/US dollar (USD) should the likely ANC-DA pact emerge.
Sector focus: eCommerce
The Foschini Group (TFG-JSE)delivered strong 2H24 HEPS, which rose +15% YoY on the back of impressive online retail sales growth. The results were meaningfully ahead of consensus expectations, which were for 2H earnings to be roughly flat YoY. Key to this better-than-expected performance was the improved cost control in SA. The company is also expecting for an end-of-year kick to sales when the two-pot retirement system potentially impacts consumer spending, offering potential additional upside.
Information correct at time of publishing. It is important to conduct thorough research and analysis using a combination of fundamental and technical analysis techniques to make informed trading decisions. Additionally, consider your risk tolerance, investment objectives, and time horizon when assessing company performance for trading.
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Market Movements – 14 June 2024
Don't miss the July bull run
According to Goldman Sachs Group Inc.’s trading desk, a flood of cash from passive equity allocations will pour into the stock market in early July, setting up a continuing rally through the early summer. Since 1928, the first 15 days of July have been the best two-week trading period of the year for equities, and with the rally typically fading after July 17.
Corporate default rates in Europe rising
Corporate default rates are rising on the back of decade-long interest rate highs as central bank action to tame inflation has put an abrupt end to an era of inexpensive credit. Companies that are already highly indebted are at the highest risk, so pick stocks wisely!
The growing case for manganese
Cobalt, nickel and lithium are in-demand metals for EV batteries but manganese is a potential alternatives to lithium batteries. Interest around manganese in for use in the EV race is rising as it is cheaper to mine than lithium and there is much more of it available. In addition, there are also issues associated with cobalt mining, and most mined nickel is unsuitable for use in EVs. According to a Euronews report, Tesla (TSLA-NASQ) and Volkswagen are two of the most prominent companies exploring the use of manganese batteries at the moment, with Elon Musk recently having gone on record to say that manganese batteries have “potential” to drive the global transition. This is a potential hyper growth trend as the automotive industry has entered a fiercely competitive phase in the EV transition. Tesla, Hyundai-Kia and General Motors (GM-NASQ) now offer EVs with more than 480 km of range for less than the cost of the average new vehicle sold in the US, according to an analysis by Bloomberg Green. The most affordable is Hyundai’s 2024 Ioniq 6, which comes with 361 miles of range and a price tag that’s 25% below the national average of roughly $47,000. The largest mining companies with some exposure to manganese include Assmang (Part-owned by ARM Ferrous – ARI-JSE), BHP Billiton (a BHP Group company – BHPL-NASQ), and South32 (S32-JSE).
Investor exodus shallows SA capital markets
In its recently released Financial Stability Review, the South African Reserve Bank (SARB), sustained capital outflows from South Africa’s bonds and equities have hurt the depth and liquidity of its markets and may have repercussions for efficient pricing. It’s also reduced diversification options to both borrowers and investors, and may affect investor returns and the cost of funding.
Stock focus: Spar
Spar (SPP-JSE) is tracking ahead of consensus expectations, with guidance showing H1FY24 diluted HEPS from continuing operations improving from -13 to -3% YoY, and expectations for a stronger H2 given that the KZN distribution centre SAP implementation issues are still impacting the local operation for the first half of H1). Importantly, Spar has classified Poland as a discontinued operation. Spar will provide an update on the disposal at the results presentation, with expectations that the company passed an impairment of c.R830m on the Polish assets. From a debt perspective, all financiers “remain supportive of the group and have agreed to amendments to banking covenants.”
Don't underestimate a rand rally
In currency trading news, Barclays strategists, including Mitul Kotecha, believe markets are underestimating the potential for a significant rand rally in the event of an ANC-DA coalition, which could form by the end of this week. In an emailed note, Barclays targets the South African rand ZAR near R18.00/US dollar (USD) should the likely ANC-DA pact emerge.
Sector focus: eCommerce
The Foschini Group (TFG-JSE) delivered strong 2H24 HEPS, which rose +15% YoY on the back of impressive online retail sales growth. The results were meaningfully ahead of consensus expectations, which were for 2H earnings to be roughly flat YoY. Key to this better-than-expected performance was the improved cost control in SA. The company is also expecting for an end-of-year kick to sales when the two-pot retirement system potentially impacts consumer spending, offering potential additional upside.
Information correct at time of publishing. It is important to conduct thorough research and analysis using a combination of fundamental and technical analysis techniques to make informed trading decisions. Additionally, consider your risk tolerance, investment objectives, and time horizon when assessing company performance for trading.