17 - 21 November 2014
Our regular look at the news making the headlines, using our market insight information and analysis tools - now with online videos and tutorials.
By Shaun Murison, Market Analyst
A busy week of production and sales data has been mostly upbeat this week. Manufacturing production increased by 8% in September 2014 (y/y), which although compared off a low base from last year’s strike within the automotive sector, far exceeded analysts’ expectations. The improved figure was mainly due to higher production in motor vehicles, parts and accessories (+121.6%), while food and beverages also made a meaningfully positive contribution with production growth of 6.1%.
Retail trade sales measured in real terms were lacklustre increasing by only 2.3% y/y in September 2014, with the highest annual growth rates being realised in hardware, paint and glass. Wholesale trade sales were however more encouraging increasing by 5.9% y/y in September 2014. Motor trade sales at current prices increased by a massive 8.1% with the highest annual growth rates coming from workshop income (18.1%) and accessory sales (14.7%).
Mining production increased by 5.3% y/y in September 2014 with the highest positive growth rates recorded for iron ore (38.3%), manganese ore (20.1%) and diamonds (15.1%). Platinum group metals remained a large negative contributor to the overall growth figure.
In Europe, Flash GDP data showed 0.2% growth within the region. Preliminary GDP data from Germany and Italy was in-line with estimates at +0.1% and -0.1% respectively, while French preliminary GDP data exceeded expectation (+0.1%) coming in at +0.3%.
In China, industrial production (y/y) fell to 7.7% from the previous months reading of 8%, while Consumer price Index data (CPI) alluded to inflation within the region remaining at 1.6%.
In the U.S., weekly unemployment claims were slightly higher than expected showing that 290 000 people filed for unemployment benefits for the first time last week. Retail sales and core retail sales (m/m) both showed 0.3% growth which was ahead of estimates at 0.2%.
The market movers list this week has reverted back to the mean of weeks gone by, as industrials lead the charge while resources return to their relative underperformance. Last week’s temporary relief in the resources has been eroded with the sector continuing to suffer as, lower commodity prices and global demand concerns take their toll.
The impact on local miners from an iron ore price, which hovers around multi-year lows, was highlighted last week, after Kumba warned of minimum full-year decline in gross profit of 20%. This week witnesses’ forward guidance from Assore Ltd reiterating the conundrum, as the company expects Headline Earnings per Share (HEPS) to be between 37.5% and 45.9% lower over the interim period.
Sasol’s share price remains a function of the oil price in rand terms. The recent weakness we have seen has been on the back of a declining crude price while the rand remains resilient and investors consider the R90billion capital expenditure for the construction of its new ethane cracker complex.
The world’s second largest and OPEC’s largest oil producer, Saudi Arabia, has recently cut export prices to the U.S., which hasn’t bode well for the price of crude. OPEC is however scheduled to convene later this month and those hopeful on a rebound in the price of crude would be looking to evidence of lower production commitments from the organisation which currently accounts for 40% of global oil.
Despite a temporary mid-week setback in terms of share price gains, Naspers has recovered sharply to trade back into all-time high territory once again. Third quarter results from Chinese counterpart Tencent Holdings (of which Naspers owns around 30%) were solid with an increase in revenue of 28% and gross profit of 49% against the comparative 2013 quarter.
Although the results were good, they fell short of expectation and in turn Naspers realised an intraday share price loss in excess of 4% on Wednesday. The losses were short lived as market participants found favour with two sets of news relating to increasing distribution channels for the company. Naspers has announced joint ventures with Singapore Press and Norway’s, Shibsted ASA and Telenor ASA, which will boost the company’s e-commerce presence in emerging markets Brazil, Indonesia, Thailand and Bangladesh.
Tencent Holdings announced a deal with Warner Music Group in the U.S. In the deal, Tencent will distribute and manage Chinese audio services, streaming licensed music to web users through the likes of the QQ Music streaming platform. Naspers is set to release interim results on the 25th of November 2015.
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|19 November 2014||18:30||Southern Sun Elangeni & Maharani, Durban||1.5hrs|
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Source: INET BFA, as of 14/11/2014
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