Episode Summary: Simon Brown dives into the week’s biggest financial and economic stories, covering Trump’s election win, Nvidia's inclusion in the Dow, rate cuts expected from the FOMC and BOE, and the latest updates on Murray & Roberts, palladium, and gold. Recorded after market open, this episode sheds light on key trades, trends, and the shifting global landscape.
Nvidia | Weekly chart | Close 06 Nov 24
Gold | Weekly chart | 07 Nov 24
Listener Takeaway: Markets remain unpredictable but resilient, with global relations, tech policies, and central bank strategies driving shifts. Simon emphasizes informed trading and the long view in these uncertain times.
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Disclaimers: The JSE Direct podcast is independent of JSE Limited and reflects Simon Brown’s views, not necessarily those of the JSE. Always consider risks when investing.
Important titbit about today's SA headline CPI print. It meant that CPI rose by 4.3% y/y in Q3 2024. In Sept, SARB expected 4.4% for Q3, implying Sept print largely in line with their expectations. Therefore, today's number will not change SARB's thinking. Folks should calm down.
— Hugo Pienaar (@hugopien) October 23, 2024
Chapters
00:00 Local Inflation and Economic Outlook
06:01 Using AI for Investment Analysis
12:06 Famous Brands Results Analysis
18:05 Comparative Analysis with SPUR
South African retail sales | YonY
Johnson & Johnson quarterly dividend payments
00:00 Retail Sales Recovery and Economic Outlook
04:29 Tribute to Tito Mboweni
08:32 Johnson & Johnson: A Steady Investment
09:52 Bytes Technology Group: Market Reactions
12:32 Quilter's Strong Performance
14:29 Cecil's Ongoing Struggles
15:56 Brent Oil Prices and Global Economy
17:48 Volatility of the Rand and Market Predictions
Overview:
In this episode of JSE Direct, Simon Brown breaks down the latest market updates, key stock analyses, and insights into the South African investment landscape. Episode highlights include discussions on property developers Calgro M3 and Balwin, Capitec’s strong performance, Purple Group’s rise, Afrimat’s challenging update, and Wilson Bailey’s long-term chart breakout. The show also covers upcoming events and Brown's views on Nvidia’s stock movement.
Calgro M3 weekly chart | Close 09 October 2024
A breakout after a 17-year consolidation is very bullish in TA.
Add the fundamental underpin.
I think this still has lots of room to run. pic.twitter.com/fBk5BCKtvk— Richard Thomason (@richytee) October 9, 2024
Nvidia weekly chart | Close 09 October 2024
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Chapters
00:00 Market Overview and Calgro M3 vs Balwin
07:11 Capitec's Performance and Future Outlook
12:43 Exploring Other Stocks: Purple Group and Afrimat
18:15 Long-term Trends: Wilson Bailey and Nvidia
Stimulus Measures: The Chinese government has initiated a stimulus, which includes cutting reserve requirements and lowering interest rates. While spending has not picked up fully, the China 50 ETF (in US dollars) has wiped out losses dating back to July 2022. Hong Kong’s Hang Seng index shows a similar trend.
Market Sentiment: Short squeezes have played a role in pushing the prices of big Chinese companies like Alibaba and Tencent higher. Despite concerns about China's long-term investability (raised by experts like Viv Govender of Rand Swiss), Simon remains optimistic about continued growth in the medium term.
Shift in Hot Money: There's been a notable shift away from tech stocks like Apple and Nvidia, with more capital flowing towards China in recent days. Simon discusses the potential for short-term pullbacks, but he sees this as an opportunity.
Top Performers: Property ETFs have outperformed, with the CSPROP, Satrix Property, and 1nvest Property ETFs gaining between 30% and 31.7% over nine months ending in September 2023.
Underperformers: ETFs linked to palladium, platinum, and tech innovation (e.g., Sygnia’s Fourth Industrial Revolution ETF and Satrix Healthcare Innovation ETF) have shown negative returns.
Simon expects further growth in the property sector but at a more moderate pace than this year’s 30% returns. He highlights the potential impact of upcoming interest rate cuts, consumer spending at malls, and the demand for yield as government bond rates decrease. Some REITs, particularly those in rural and township retail spaces, are performing exceptionally well.
The market tends to move ahead of the cuts based on expectations, but technically any cut is great for cheaper debt and more consumer spending at the underlying properties, plus a lower rate for the valuations which means a higher present value.
So yes, they can keep going.— The Finance Ghost (@FinanceGhost) October 2, 2024
The Rand has seen fluctuations, dipping to as low as 17.02 against the US dollar and facing pressures from global events such as the Iranian attack on Israel and rising oil prices. Simon expects the Rand to strengthen and potentially break below 17, possibly reaching levels as low as 14.
Oil Prices: OPEC is grappling with maintaining production discipline. Oil prices are likely to hover around $70 per barrel, which is positive news for South African consumers in terms of petrol prices.
South African PMI and Vehicle Sales
PMI: South Africa’s PMI for September was positive, indicating slight economic expansion. The absence of load shedding and lower interest rates have contributed to the improved outlook.
Vehicle Sales: September saw better-than-average vehicle sales (44,000 units). Simon emphasizes the potential upside in companies like Combined Motor Holdings (CMH), which has started to perform after years of stagnation.
Investment Strategy in a Bull Market
Simon reiterates his bullish stance, noting that while there will be pullbacks (up to 10% corrections), the overall trend remains upward. He advises staying long in the market, especially in a bull phase.
Summary: In this episode of JSE Direct, Simon Brown delves into the latest developments in South African markets, focusing on the impact of China's major economic stimulus and the strengthening of the Rand. Key highlights include:
Rand Strength: The Rand has seen notable appreciation, reaching levels of R17.12 to the US dollar. Simon discusses the drivers behind this, particularly US dollar weakness and foreign purchases of South African bonds. He explores possible future movements, with a target of R16.80 and potential for further strengthening.
Global Stimulus: China's massive stimulus measures, including relaxed lending rules for banks and lower interest rates, are aimed at boosting consumer demand. This is the largest Chinese stimulus since 2008, with significant potential to impact global commodities and bolster the South African economy.
Commodities & Bull Market: The commodities market is seeing positive movement, with Chinese demand driving up prices for industrial metals like copper, iron ore, and coal. Simon notes how the previous commodity bull run in 2021 significantly strengthened the Rand and discusses the potential for a similar scenario if China's economy continues to gain momentum.
Market Performance: South Africa is outperforming other emerging markets, particularly Brazil and Mexico, over the past six months. Simon explains the drivers of this outperformance and highlights the continuing bull run in the JSE Top 40 and All-Share indices.
SA Equities: Our fortunes have changed significantly since the GNU was formed in June.
SA has dramatically outperformed (in US$) not only Emerging markets in general, but Brazil & Mexico. SA has tilted more centrist, with a focus on the economy. Brazil & Mexico both shifted left. pic.twitter.com/Zz6OOM4dCJ— Karin Richards (@Richards_Karin) September 23, 2024
Rate Cuts: South Africa and several other global economies, including the US and Europe, have entered a rate-cutting cycle. Simon emphasises the importance of this for markets, especially property stocks, which are benefiting from lower bond yields and improved investor sentiment.
JSE Index Changes: Anglo Platinum has been removed from the JSE Top 40 index, replaced by Pepkor. Simon discusses why Pepkor’s entry is significant, given its position as a retailer and its attractive valuation compared to competitors.
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Episode Overview:
In this episode, Simon Brown dives into the current economic landscape with a focus on interest rates, inflation, and the state of the South African Rand (ZAR). He also explores asset-light businesses and why they make great investments, followed by a breakdown of the latest market activity and local company results.
SA Prime and CPI September 2024
Palladium weekly chart | 18 September 2024
"Rate cuts are coming, and I think we'll see a short-term sell-off as markets react."
"Asset-light businesses like Santova and Shein are great investment opportunities because they don't carry the heavy burden of owning physical assets."
"Outsurance continues to impress with strong numbers and dividends, proving the strength of short-term insurers."
Chapters
00:00 Economic Landscape and Rate Decisions
03:09 Understanding Asset-Light Businesses
05:54 Market Psychology and Upcoming Events
09:11 Local Results and Investment Insights
11:52 Exploring New Investment Opportunities
15:10 Finbond and Market Speculations
17:59 Larry Ellison and Oracle's Rise
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Summary
In this episode of JSE Direct, Simon Brown discusses various topics including the troubles faced by Anglo Platinum, the performance of leisure stocks, Anglo Gold Ashanti's* acquisition of an Egyptian gold miner, and the impact of two pot withdrawals. He also touches on the future of PGMs, the growth of electric vehicles, and the psychology of markets.
"Anglo Platinum has a problem which is perhaps a little more unique than just the PGMs."
"There is that initial overhang. A whole lot of people will get Anglo-Platinum shares and say, 'I don't want these' and sell it."
"The World Platinum Council is saying we're gonna have deficit again, that's the important point."
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00:00 Challenges for Anglo Platinum and the PGMs Market
02:22 The Future of PGMs and the Impact of Electric Vehicles
07:54 The World Platinum Council's Projections
09:16 The Diminishing Role of Internal Combustion Engines
11:09 The Impact of Low Prices on Production
14:55 Anglo Gold Ashanti's Acquisition and the Use of Equity
17:56 Pot Withdrawals and their Effect on the Market
19:18 Performance of Leisure Stocks: City Lodge and Sun International
19:42 Concerns about Sports Betting and its Impact
20:10 Upcoming Events: Investment Goals and the Psychology of Markets
In this episode of JSE Direct, Simon Brown delves into the impact of anticipated interest rate cuts and how they may affect various sectors and stocks. He shares his thoughts on potential beneficiaries like consumer stocks, REITs, and companies with high levels of debt. The episode also covers key updates on Nvidia's earnings, Nike's stock valuation, and a new ETF listing by ETFSA.
Nike | Close 27 aug 24 | Weekly chart
ETFSA is listing an Actively Managed ETF, The ETFSA Balanced Foundation Prescient AMETF (JSE code: ETFSAB).
Simon spoke with Gareth Stobie from ETFSA about the ETF, the listing process, where it fits in a portfolio and what it will be holding.
In this landmark 600th episode of JSE Direct, Simon Brown reflects on the podcast's journey from its beginnings as a radio show in 2008 to becoming a leading podcast for market insights. The episode covers a range of topics, from South Africa's local CPI and a strengthening Rand to the surprising twists in the gold market and a mixed bag of corporate earnings.
South Africa's CPI has come in better than expected at 4.6%, fueling speculation on whether the next rate cut by the MPC might be more aggressive than anticipated.
The Rand has shown significant strength, dropping below 18 to the dollar, with Simon analyzing the contributing factors, including foreign investment in bonds and a weakening US dollar.
Simon reaffirms the current bull market, highlighting the JSE's all-time highs and advising listeners to stay invested while cautioning against the risks of sitting on the sidelines.
Top40 20 August 2024 | Weekly chart
Gold prices have surged above $2,500, driven by central banks' increased purchases and concerns about the US dollar's stability. Simon discusses the potential for further gains in the gold market.
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Sasol's Struggles:
Simon revisits Sasol's recent production and trading updates. Despite some positive news, the company's financials remain grim due to significant write-downs and a challenging pricing environment, especially in the chemical complex. With a forward PE ratio hovering around 3, Simon questions the actual value in Sasol and advises caution, emphasising the importance of waiting for a stock to show signs of recovery before investing.
Sasol weekly chart | 13 August 2024
Simon provides insights into ADvTech's latest trading update. Despite a voluntary update (not mandated by a 20% variance), the company shows strong growth in earnings per share. He discusses the stock's valuation, historical performance, and why he remains optimistic about its future prospects, even as it trades at a PE ratio of around 15.
ADvTech weekly chart | 13 August 2024
Simon shares his thoughts on CMH, a stock he has held for years. Despite a stagnant price movement over the past three years, the stock offers a solid dividend yield. He discusses the broader consumer environment, the potential impact of reduced interest rates, and why he continues to favour CMH over competitors like Motus.
CMH weekly chart | 13 August 2024
After a year and a half of delays, Renergen finally starts producing helium. While the stock has seen a recent uptick, Simon highlights the challenges that still lie ahead, including scaling up production and the company's upcoming NASDAQ listing. He also reflects on the broader sentiment in the junior mining sector.
Coronation has launched six actively managed ETFs on the JSE, a significant development in the local ETF market. Simon explains the concept of actively managed ETFs and why this move could be a game-changer for both Coronation and the JSE, even if he personally isn't planning to invest in them. Find details here.
The latest US CPI data shows a slight decrease to 2.9% for July, but core inflation remains elevated. Simon discusses the implications for future interest rate cuts by the Federal Reserve and the potential impact on South African monetary policy.
Simon pays tribute to Brett Duncan, a former stockbroker and warrants market leader at Standard Bank, who recently passed away. Brett was a key figure in Simon's early career and played a significant role in the South African warrants market. His passing is a significant loss.
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Jerome Powell's Statement:
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The South African President's recent speech emphasised making the country a hub of construction and infrastructure development.
The potential for public-private partnerships and the types of infrastructure that might be developed, including roads, energy transmission, and public buildings.
JSE Listed Construction Stocks | 1 year return | close 23 July 2024
Simon Brown wraps up the episode by emphasizing the importance of infrastructure development for South Africa's economy and reiterates his top stock picks to benefit from potential future construction projects: Raubex, Afrimat, and Reunert. He also touches on the potential 3% GDP growth for 2025 and the broader market implications.
Today is the last day to trade before Pick n Pay rights issue kicks in.
° If you hold at close tonight you will receive 51.11 rights per 100 PIK shares, code will be PIKN
° You can sell then in market
° Or pay 1596c per each to get a new PIK share
° HAVE to do so by 30 July— Simon Brown (@SimonPB) July 16, 2024
Impact:
Winners:
Challenges:
[caption id="attachment_42560" align="aligncenter" width="849"] Tesla weekly chart | 02 July 2024[/caption]
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Key Takeaways
Simon Brown
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dd
Simon Brown
SPAR:
Foschini Group:
[caption id="attachment_42378" align="aligncenter" width="849"] USDZAR | 12 June 2024[/caption]
Simon Brown
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New Two-Pot Pension System:
[caption id="attachment_42315" align="aligncenter" width="849"] Brent oil | weekly | Koyfin
[caption id="attachment_42316" align="aligncenter" width="849"] Santova daily | 06 May 2024 | Koyfin
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[caption id="attachment_42259" align="aligncenter" width="849"] Rand | 1pm 30 May 2024[/caption]
Changes in 10X ETFs: Local Dividend Aristocrat and Smart Beta merging into a Top 50 ETF.
Nvidia's Financial Performance
[caption id="attachment_42201" align="aligncenter" width="849"] Calgro M3 vs Balwin[/caption]
JSE Direct is an independent broadcast and is not endorsed or affiliated with JSE Limited. Views expressed are solely those of the presenter.
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[caption id="attachment_42112" align="aligncenter" width="849"] Top40 close 15 May 2024[/caption]
[caption id="attachment_42113" align="aligncenter" width="849"] Clagro M3 close 15 May 2024[/caption]
Notable events include Richemont*, Palo Alto, Netcare, Astral, Famous Brands, Coronation, UK and US inflation data, FOMC minutes, and Nvidia results.
Simon Brown
Introduction: