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<p>Nesan Nair, Senior Portfolio Manager, Sasfin Securities joins CNBC Africa to look at movements shaping the South African markets.</p>


Why Naspers is about to add to JSE’s trading headache

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<p>Trevor Simumba, Economic and Trade Expert CNBC Africa to look at movements shaping the Zambian market space.</p>


Analysis: Why Zambia’s infrastructure drive failed to lift economy

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<p>Kumba Iron Ore has pledged to support black women and youth owned small businesses within the mining community by giving them the opportunity to supply the products and services to the value chain.</p>


Kumba commits R2bn to small business development

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<p>CNBC Africa is joined by Penny Herbst, Director Strategy for Africa GreenCo. She believes that the electricity supply industry needs a fresh approach.</p>


Should Africa rethink its electricity supply approach?

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<p>When the clock strikes midnight, South Africa&#8217;s fuel price for the month of May is expected to increase by 54.00 cents per litre on petrol and 1.00 c/l on diesel from midnight. Joining CNBC Africa is the Director for Fuel Pricing at the Department Of Energy, Robert Maake.</p>


Global factors pumping SA’s fuel price

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<p>The first quarter of 2019 brought much needed relief for investors following a rocky finish last year. Most global stock markets are off to a strong start so far this year but what could the second quarter have in store? Lukman Otunuga, Research Analyst at FXTM joins CNBC Africa for more.</p>


Where are the markets headed in Q2?

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<p>Peter Attard Montalto, Head of Capital Markets Research, Intellidex joins CNBC Africa to look at Moody’s ratings on South Africa and MPC meeting.</p>


Intellidex reviews SA MPC meeting, Moody’s ratings expectations

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<p>The naira has remained stable both at the official and parallel markets despite several odds facing the currency ahead of the elections in Nigeria; that&#8217;s according to Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria. He joins CNBC Africa for this discussion.</p>


Why the naira has remained stable despite election pressure – ABCON

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<p>Joining CNBC Africa to discuss the mix of global and local market news is Richard Bottger, Portfolio Manager at Tower Capital Management.</p>


Poor retail figures are a function of SA’s economy – Analyst

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<p>On the back of the retail figures that was released yesterday CNBC Africa reporter Kopano Gumbi is spoke to Evan Walker, Co-manager of the 36ONE Equity Fund for his analysis of the figures.</p>


Why TFG is outperforming other retail shares

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<p>On the back of the retail figures that was released yesterday CNBC Africa reporter Kopano Gumbi is spoke to Evan Walker, Co-manager of the 36ONE Equity Fund for his analysis of the figures.</p>


Why 36ONE has a contrarian view on Absa

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<p>As we are still at the early days of the New Year, many are reviewing their portfolios and investments towards becoming wealthier. After a tough 2018 in stock markets this year seems to be more promising with some Asset Managers saying three shares are worth buying in 2019. Dr Adrian Saville, Chief Executive, Cannon Asset Managers joins CNBC Africa to unpack those buying opportunities.</p>


ANC manifesto; Watch what they do not what they say – Fund Manager

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<p>This week billions of dollars were vaporised from global markets in the worst sell off in years.  Wall Street erased its 2018 gains while the tech heavy NASDAQ torpedoed by the most in eight years. The haemorrhaging in stocks spread to markets in Asia, Europe and Africa.  So where are markets headed next? And what should you be doing with your money? CNBC Africa’s Fifi Peters investigates.</p>


Bull Run over? What should investors be doing now?

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<p>CNBC Africa’s Fifi Peters speaks to Sasfin Securities Portfolio Manager, Nesan Nair about the JSE’s dwindling trading volumes and why today was better than most.</p>


This is what is behind the JSE’s dwindling trading volumes

<p>By Dave Mohr (Chief Investment Strategist) &amp; Izak Odendaal (Investment Strategist), Old Mutual Multi-Managers</p>
<p>&nbsp;</p>
<p>Political concerns have dominated markets in recent months. It has mostly been US President Donald Trump throwing his weight around (tariffs, Iran, North Korea), but in the past week Italy has been the source of market unease. The attempt by Italy’s two populist parties to form a government including an anti-euro finance minister was blocked by the Italian president. The issue is not the instability of Italy’s governments. After all, the country has on average changed government once a year since the end of World War 2. The issue is that Italy is now a key part of the Eurozone (its third largest economy, in fact), and any hint that a new government might pull out of the single currency will cause chaos. Unlike ‘Brexit’, where the UK will continue to use the pound once the UK exits the European Union, an ‘Italeave’ or ‘Quitaly’ event would result in the redenomination of all debts, assets and contracts into a new, probably weaker currency.</p>
<p>We saw this movie with Greece between 2011 and 2014, but Italy is much bigger and systemically more important than Greece. It is too big to fail, but also too big to bail out, as often noted. However, this also means that Italy is much less likely to take the painful choice of leaving the euro (Greece bit the bullet of painful austerity instead of leaving). By Friday, markets breathed a sigh of relief after a second attempt at forming a government succeeded, this time with a less controversial choice of finance minister and a more technocratic cabinet overall. This might not be the last time these concerns bubble to the surface, given that the Italian people are right to feel aggrieved. Italy’s economic performance has been dismal over the past decade, and real per capita incomes never recovered to pre-crisis (2008) levels.</p>
<p>&nbsp;</p>
<p><strong>Returns under pressure</strong></p>
<p>The more pressing issue for investors is that returns from the main asset classes (with the notable exception of local fixed interest) have been disappointing over the past three years. The largest component of a typical Regulation 28 compliant balanced fund is local equities. The annual return including dividends over three years on the FTSE/JSE All Share Index was 5.4% at the end of May. Year-to-date returns are -4.3%, with May itself having been a deeply negative month (-3.5%). The FTSE/JSE Capped SWIX, our preferred local equity benchmark since it limits concentration risk, returned 3.5% per year over three years due to a more realistic and responsible weighting to Naspers, which returned 19% per year over the three years.</p>
<p>If we just focus on more recent returns, the underperformance is fairly widespread across sectors. Financials and Industrials were deeply negative in the first five months of 2018, while Resources have returned 8%. However, within the latter sector, gold and platinum miners have lost in excess of 20% this year while the heavyweight diversified miners have gained 17%. While Naspers enjoyed an incredible run over the past few years, 2018 has not been great, with a 12% decline to end May. British American Tobacco, the other mega-cap Industrial stock, is down 20% year-to-date.</p>
<p>&nbsp;</p>
<p><strong>Local is global</strong></p>
<p>It seems ironic that the local market is struggling so much at a time when optimism about the local economy has increased sharply. But the JSE no longer reflects the local economy, now that its largest constituents are global firms. It is also true that optimism in the local economy has probably increased faster than activity. This week’s first quarter GDP release is likely to be disappointing, but the overall economic outlook is still an improvement on the previous few years.</p>
<p>In fact, it is increasingly the case that major equity markets do not closely reflect their domestic economies anymore, being dominated instead by multinational firms that sell their wares across the globe, instead of focusing on a single market. Therefore, when thinking about investments, we need to take the health of the global economy into account. The OECD (a think-tank representing the world’s most advanced economies) stated in its latest economic outlook that, “trade and financial integration since the mid-1990s has made economies more dependent on developments abroad…Integration is particularly apparent in financial markets, with a common global factor increasingly determining domestic equity and government bond prices.”</p>
<p>What makes it tricky is that the global revenues of multinational firms are translated into their home currencies at prevailing exchange rates. In the case of South Africa, the rand ended May 5% stronger than the 2017 average rand-dollar exchange rate (of R13.30). The stronger currency not only reduces the rand returns from global markets, but also the rand earnings of global companies. With South African balanced funds now allowed up to 30% exposure to offshore assets (more if Africa is included), the typical South African balanced fund probably has direct and indirect global exposure in excess of 50%. If the rand’s strong run since January 2016 is running out of steam, it will be beneficial to local returns.</p>
<p>The OECD’s latest global growth forecast confirms the view that the underlying economic picture remains healthy, despite a sluggish first quarter, especially in Europe. Global growth of close to 4% is expected over the next two years, in line with the long-term average. In other words, not historically strong growth, but the best patch in several years. There are risks to this optimistic outlook – there always are. These include the increased protectionist stance of the US and the risk of a surging dollar if the Federal Reserve (Fed) hikes rates too aggressively. But with inflation still subdued, the Fed need not be in a hurry. The first inflation indication from May, the average hourly wages of workers, increased 2.7% year-on-year. This is still remarkably low given that unemployment declined to 3.8%.</p>
<p>&nbsp;</p>
<p><strong>Valuations </strong><strong>reasonable</strong></p>
<p>Global equities (MSCI All Countries Word Index) were marginally positive in May and also year- to-date in US dollar terms. Over the past 12 months, global equity returns are a decent 12% and 8% over three years annualised. Given the recent weakness in price and strong earnings growth, equity markets are reasonably valued based on traditional valuation methods such as forward price: earnings (PE) ratios. These PE ratios across the major markets are somewhat above long-term averages, but not dramatically so, as long as expected earnings growth materialises. While global growth is solid and valuations reasonable, there is no reason to believe that the return outlook from equities has fundamentally deteriorated. One simply has to be patient.</p>
<p>&nbsp;</p>
<p><strong>Fat years and lean years</strong></p>
<p>The valuation of the local market is skewed by the size and rating of Naspers, which trades at a forward PE ratio of 24 due to its exposure to the Chinese internet giant, Tencent. Excluding Naspers, the local market is not expensive.</p>
<p>Chart 1 shows the rolling three-year annualised returns of the local and global equity markets (both in rand and with dividends reinvested) over the past 40 years. Equity returns have been trending lower since 2015, and this is clearly a source of concern for investors. However, the chart clearly shows that returns are cyclical, with fat years followed by lean years. Over time, there are more fat years than lean ones, and the average annual growth over this entire period is 20%. Staying out of the market means betting against this strong upward trend. You might get it right for a while, but over time the odds are stacked against you.</p>
<p>&nbsp;</p>
<p><strong>Diversification helps</strong></p>
<p>The impact of equity volatility can of course be cushioned by diversifying across other classes. Taking the other major asset classes in turn, developed market bonds are not attractive despite recent rate rises (though the knee-jerk sell-off in Italian debt created a terrific opportunity for the brave). Local bonds have stood out, delivering 5% year-to-date, 11% over 12 months and 8% per year over three years. But it remains an attractive asset class given high yields and low inflation. The Reserve Bank’s conservative stance of maintaining positive real interest rates also supports local fixed interest returns. Local property, for so long the darling asset class of local investors, slumped 19% this year, largely due to corporate governance and sustainability concerns over the Resilient stable of companies. It means that listed property is barely positive over three years. This too is a sector that has internationalised dramatically over the past decade, with 40% to 50% of revenue generated outside South Africa (depending on the choice of benchmark). The sell-off has created a much more attractive entry level, but the tough operating environment is likely to put downward pressure on distribution growth.</p>
<p>Unfortunately, nobody can manufacture returns (except through running a Ponzi scheme). We have to work with what the market gives us and then attempt to add some value through valuation-based active asset allocation and selecting the right fund managers within each asset class to do security selection. The market has not been giving us much. However, the return outlook from a diversified portfolio has not dramatically and permanently declined.</p>


Understanding the impact of Italy’s politics and possible departure from the EU on global markets

<p><em>Bianca Botes | Peregrine Treasury Solutions</em></p>
<p>It was an eventful week in local markets with the State of the Nation Address (SONA) taking place in Parliament on 16 February 2018 followed by the highly-anticipated National Budget Speech, presented by embattled Finance Minister Malusi Gigaba on 21 February. South Africa impressed ratings agencies with the Budget Speech on Wednesday, with all three agencies stating that they are satisfied and optimistic following the presentation.</p>
<div id="attachment_298976" style="width: 810px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-298976" class="wp-image-298976 size-full" src="http://cnbc.africa/wp-content/uploads/2018/02/Rands-Wikipedia.jpg" alt="" width="800" height="639" /><p id="caption-attachment-298976" class="wp-caption-text">KONICA MINOLTA DIGITAL CAMERA</p></div>
<p>The rand started the week off on a strong footing, trading around R11.60 before retreating slightly to R11.75 on Tuesday as the US dollar gained momentum. However, the greenback’s momentum, coupled with the underperformance of emerging markets, could not hold the rand down as Gigaba announced a rise in VAT from 14% to 15%, a move many deem “risky” for the governing party in light of the upcoming 2019 national elections. That said, this move indicates government’s commitment to making hard choices to ensure a strong economy that, in time, will benefit all.</p>
<p>A couple of weeks ago the market largely anticipated a downgrade by Moody’s, given a political landscape that seemed to be dire under the rule of erstwhile president Jacob Zuma. However, since then key political events, including a new head of state in President Cyril Ramaphosa and a market-positive SONA and Budget, has certainly turned the tables. For now a downgrade is being almost completely discounted. The current political environment, coupled with a rise in commodity prices, has created a rand strength bias in the short to medium term.</p>
<p>A word of caution however: We are still in a global market in which the United States Federal Reserve (Fed) is largely anticipated to increase interest rates, and a local environment where there is high unemployment and sluggish economic growth. Therefore, a correction in the rand can be expected. The range for the week ahead is between R11.60 and R11.80, with a longer-term view of a break above R12.10.</p>
<p>Local consumer price inflation figures, which were released on Wednesday, showed a decline of inflation to the lowest levels since September 2015, coming in at 4.6%. However, the South African Reserve Bank is expected to keep interest rates on hold for the time being, with a Reuters poll indicating that the next potential cut is only expected in November.</p>
<p>The stronger US dollar damped most commodity prices over the week, with oil dipping back down to the US$60 mark over concerns around supply stockpiles, while gold fell by 0.1%. A hawkish Fed is expected to add some pressure to commodity and equity markets, and volatility is largely expected.</p>
<p>In equities, the JSE tracked the global market down most of the week, briefly turning the tide to close up on Wednesday afternoon. Following the Budget Speech the All-Share Index saw a rise of 1.17% while the Top 40 clawed its way higher by 1.39%, with the biggest movement taking place among financial institutions. The expected monetary tightening by the Fed put a damper on international equity markets, pushing the S&amp;P500 to fall by 0.2% while the FTSE Index gave up 1%.</p>


Market Update: Eventful week sees rand firm and JSE trend lower

<p><em>Bianca Botes, Corporate Treasury Management | Peregrine Treasury Solutions</em></p>
<p>The rand opened slightly weaker this morning, trading above R11.90/$, and will struggle to find the momentum to break meaningfully below the R11.80/$ target level.</p>
<div id="attachment_125932" style="width: 740px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-125932" class="wp-image-125932 size-full" src="http://cnbc.africa/wp-content/uploads/2017/05/Rand-shutterstock1.jpeg" alt="" width="730" height="425" /><p id="caption-attachment-125932" class="wp-caption-text">Photo: Shutterstock.</p></div>
<p>Factors driving current rand levels remain mostly the same as last week, namely continued strong commodity prices and a soft US dollar.</p>
<p>The National Prosecuting Authority (NPA) is also forging ahead at an impressive rate in the state capture debacle, assisting in the revival of positive investor sentiment in South Africa.</p>
<p>Today’s ZAR weakness stems from a slight uptick in the dollar after six weeks of consecutive losses. Markets also seem to be a bit wary in anticipation of Eskom’s financial results due to be released tomorrow, which could spark further volatility.</p>
<p>This caution puts into perspective the dire state that South Africa still finds itself in as a result of weak economic fundamentals, despite the support that strong commodity prices and the weak dollar have offered local currency.</p>


markets

Why Naspers is about to add to JSE’s trading headache

Analysis: Why Zambia’s infrastructure drive failed to lift economy

Kumba commits R2bn to small business development

Should Africa rethink its electricity supply approach?

Global factors pumping SA’s fuel price

Where are the markets headed in Q2?

Intellidex reviews SA MPC meeting, Moody’s ratings expectations

Why the naira has remained stable despite election pressure – ABCON

Poor retail figures are a function of SA’s economy – Analyst

Why TFG is outperforming other retail shares

Why 36ONE has a contrarian view on Absa

ANC manifesto; Watch what they do not what they say – Fund Manager

Bull Run over? What should investors be doing now?

This is what is behind the JSE’s dwindling trading volumes

Understanding the impact of Italy’s politics and possible departure from the EU on global markets

Market Update: Eventful week sees rand firm and JSE trend lower

South African Rand will struggle to break R11.80/$

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markets

Why Naspers is about to add to JSE’s trading headache

Analysis: Why Zambia’s infrastructure drive failed to lift economy

Kumba commits R2bn to small business development

Should Africa rethink its electricity supply approach?

Global factors pumping SA’s fuel price

Where are the markets headed in Q2?

Intellidex reviews SA MPC meeting, Moody’s ratings expectations

Why the naira has remained stable despite election pressure – ABCON

Poor retail figures are a function of SA’s economy – Analyst

Why TFG is outperforming other retail shares

Why 36ONE has a contrarian view on Absa

ANC manifesto; Watch what they do not what they say – Fund Manager

Bull Run over? What should investors be doing now?

This is what is behind the JSE’s dwindling trading volumes

Understanding the impact of Italy’s politics and possible departure from the EU on global markets

Market Update: Eventful week sees rand firm and JSE trend lower

South African Rand will struggle to break R11.80/$

News Tips

Advertise With Us

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