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Taking Stock – Record volumes crash JSE systems

Emira hikes annual dividend

Taking Stock – Record volumes crash JSE systems

MARKET COMMENTARY
SOUTH AFRICAN MARKET COMMENTARY

Stocks fell after a late start to trading on the Johannesburg Stock Exchange, after record-high trading on Tuesday crashed its systems. The bourse’s Top-40 Index closed 1.67% lower at 61,609 points, with the broader All-Share Index dropping 1.5% to 67,906 points. Gold miners dragged the blue-chip index down, hurt by a slight dip in the gold price. Local focus was on inflation data that showed price increases slowed to 4.6% year on year in July from 4.9% in June.

EUROPEAN MARKET COMMENTARY

European stocks closed slightly higher on Wednesday as investors monitored inflation data and looked ahead to minutes from the Federal Reserve’s latest meeting. The pan-European Stoxx 600 index provisionally ended the session up around 0.1%. Utilities and travel and leisure shares led the gains, both climbing over 1%, while mining stocks were the worst performers. Market participants were closely monitoring economic data. U.K. inflation data for July showed an unexpected dip to 2% on Wednesday morning. Economists noted that it was likely a blip with data projected to keep trending higher in the coming months.

US MARKET COMMENTARY

The 30-Dow stocks dropped 380 points, falling for a second day, while the S&P 500 slid more than 1% on Wednesday. Robinhood shares tumbled more than 7% in after-hours trading after its first earnings report as a public company. The trading app reported a net loss of $502 million, or a loss of $2.16 per share, within the range the company had guided. Investors will monitor new jobless claims data due later today. Economists polled by Dow Jones expect a total of 365,000 in the week ended Aug. 14, slightly below the total of 375,000 in the prior week.

ASIAN MARKET COMMENTARY

Shares in Asia-Pacific fell in Thursday morning trade following overnight losses on Wall Street after the release of the U.S. Federal Reserve’s July meeting minutes, which showed officials made plans to pull back the pace of their monthly bond purchases likely before the end of the year. In Australia, the S&P/ASX 200 fell 0.62%. Australia’s unemployment rate declined to 4.6% in July, against June’s reading of 4.9%, according to seasonally adjusted estimates released Thursday by the country’s Bureau of Statistics.

CURRENCY MARKET COMMENTARY

The rand fell against a strong dollar in afternoon trade on Wednesday as investors awaited minutes from the U.S. Federal Reserve’s latest policy meeting, and as easing domestic inflation lowered expectations of a hike in interest rates soon. At the close of the session, the rand was trading around R14.93 to the dollar, 0.08% weaker.

COMMODITIES MARKET COMMENTARY

Crude prices extended their losses into a sixth day this morning, hovering near 3-month lows, hurt by growing fears over slower fuel demand amid a spike in COVID-19 cases worldwide while an unexpected rise in U.S. gasoline inventories added to pressure. Gold prices edged lower today on a firm dollar after policy meeting minutes showed U.S. Federal Reserve officials were largely on board to start easing bond purchases this year.

LOCAL COMPANIES

Curro (COH) -2.1%

The latest results from Curro Holdings show that the Covid-19 pandemic hit PSG Group’s attempts to bring better schooling to the average family – normal hard-working people who are disappointed with government schools – extremely hard. The schools are growing and attracting more scholars, but costs are rising faster than income. In addition, a lot of families just couldn’t afford to pay school fees when their employers cut their working hours, or they lost their jobs. Earnings before interest, tax, depreciation and amortisation (Ebitda) declined by 16.3% to R390 million in the six months to June 2021 compared to R466 million in the first half of the previous financial year. Headline earnings and headline earnings per share (EPS) decreased nearly 28% from R160 million to R116 million and by 49% from 37.9 cents to 19.4 cents respectively. While earnings increased by more than 400%, headline EPS declined due to the huge dilution when Curro had to force a rights issue on its shareholders towards the end of the 2020 financial year. The number of shares in issue increased from 412 million to 598 million. During the six months under review, revenue increased by just more than 12% from R1.59 billion to R1.78 billion. Average learner numbers increased by 7.2%, from 61 746 to 66 167 at the end of the first half of the financial year. While management lauded the increase in revenue and student numbers, employee costs increased by 30% and other expenses by 23%. The other expenses include the write-off of unpaid fees.

Emira (EMI) +1.3%

Listed diversified property fund Emira plans to incrementally increase its exposure to the US market. Emira’s US portfolio, comprising 11 properties with a total value $569.5 million (R8.5 billion), of which Emira’s stake is valued at $119 million, now represents 13.6% of Emira’s total assets. Emira CEO Geoff Jennett said on Wednesday the longer-term intention is definitely to increase the US portfolio percentage contribution to Emira’s total portfolio asset value “on an incremental deal-by-deal basis into the years going forward”. “It depends on the opportunities that are there but we have set ourselves an early target of 15% of total assets and we would look to invest and increase that in 5% increments over a long period of time. Emira closed its financial year with a 6.4% vacancy level in its direct portfolio, increased its tenant retention rate to 82%, achieved monthly collections of 99% of rent billed, and collected 95% of deferred rental from the April, May and June 2020 period. Arrears decreased by R9.5 million over the year to R63.8 million.

INTERNATIONAL COMPANIES

Tencent (700) -1.2%

Chinese gaming and social media giant Tencent Holdings posted a 29% rise in second-quarter profit, a slower pace of growth after the coronavirus pandemic led to a boom in online gaming last year. Net profit for the three months through June came in at 42.6 billion yuan, above an average Refinitiv estimate drawn from 13 analysts of 34.4 billion yuan. Revenue climbed 20% to 138.3 billion yuan, in line with expectations. Sales from mobile games grew 13%. The results come amid investor concerns that Tencent will continued to be ensnared in an onslaught of regulatory actions that Chinese authorities have unleashed on several sectors with the tech industry being the hardest hit. In particular, regulators have launched a slew of anti-trust probes, cited the need to boost data privacy and pushed for better treatment of consumers.

Nvidia (NVDA) -2.2%

Nvidia reported earnings on Wednesday for its second fiscal quarter, which ended Aug. 1, beating Wall Street estimates because of strong graphics card sales. However, Nvidia’s cryptocurrency chip product, CMP, had lower sales, at $266 million, than the $400 million the company predicted in May. Shares of Nvidia were up more than 2% in after-hours trading. Nvidia forecast $6.8 billion in revenue in the current quarter, beating Refinitiv expectations of $6.5 billion. Nvidia is in a period of sustained, massive growth in its business as semiconductors are in short supply worldwide and as demand for the kind of processors that the company specializes in skyrockets. Nvidia’s revenue rose 68% annually during the quarter. In the previous quarter, sales grew 84%.

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