Investors Shrug Off Concerns About the New Omicron

SOUTH AFRICA MARKET REVIEW

• South African markets closed in the green yesterday, as investors shrug off concerns about the new Omicron variant of COVID-19.
• Platinum mining companies, Anglo American (JO:AMSJ) Platinum, Royal Bafokeng Platinum (JO:RBPCBe) and Impala Platinum (JO:IMPJ) Holdings gained 4.6%, 4.3% and 4.2%, respectively.
• Pharmaceutical companies, Adcock Ingram (JO:ADEOJ) Holdings, Netcare (JO:NTCJ) and Aspen (JO:APNJ) Pharmacare Holdings advanced 4.3%, 2.3% and 2.0%, respectively.
• Banking companies, Absa (JO:ABGJ) Group, FirstRand (JO:FSRJ) and Capitec Bank (JO:CPIJ) Holdings climbed 3.3%, 3.0% and 2.4%, respectively.
• Gold mining companies, AngloGold Ashanti (JO:ANGJ), Harmony Gold Mining Company and Sibanye-Stillwater added 2.8%, 1.9% and 1.2%, respectively.
• On the flipside, retailers, Cashbuild (JO:CSBJ), Lewis Group (JO:LEWJ) and Massmart Holdings (JO:MSMJ) declined 2.1%, 1.5% and 1.1%, respectively.
• The JSE All Share index advanced 1.0% to close at 71,198.08.

UK MARKET REVIEW

• The UK market finished firmer yesterday, following an easing of fears regarding the Omicron COVDI-19 variant among investors.
• Telecommunication companies, BT Group (LON:BT) and Vodafone Group (LON:VOD) gained 4.9% and 1.6%, respectively.
• Insurance companies, Old Mutual (LON:OMU), Aviva (LON:AV) and Legal & General Group gained 3.8%, 2.4% and 1.6%, respectively.
• Travel and leisure sector stocks, International Consolidated Airlines Group SA (LON:ICAG), Whitbread (LON:WTB) and InterContinental Hotels Group (LON:IHG) advanced 3.4%, 3.1% and 2.6%, respectively.
• Financial companies, Barclays (LON:BARC), HSBC Holdings (LON:HSBA) and Lloyds Banking Group (LON:LLOY) added 3.0%, 2.4% and 1.9%, respectively.
• On the contrary, education products and service provider, Pearson declined 1.7%.
• The FTSE 100 index advanced 1.5% to close at 7,168.68.

US MARKET REVIEW

• US markets ended lower yesterday, after the Californian and San Francisco Departments of Public Health and the Centers for Disease Control and Prevention confirmed the first case of the Omicron variant of COVID-19 in California.
• Groupon shed 3.3%, after the company announced that Zappos veteran, Kedar Deshpande will be appointed as its next CEO.
• Insurance companies, American Express (NYSE:AXP) and Travelers (NYSE:TRV) dropped 1.5% and 1.0%, respectively.
• Financial sector companies, Goldman Sachs Group (NYSE:GS) and JPMorgan Chase (NYSE:JPM) & Co declined 0.7% and 0.6%, respectively.
• The S&P 500 index fell 1.2% to settle at 4,513.04, while the DJIA index declined 1.3% to close at 34,022.04.
• The NASDAQ index eased 1.8% to end the trading session at 15,254.05.

ASIA MARKET REVIEW

• Asian markets are trading mostly higher this morning, despite continued concerns about the impact of the Omicron coronavirus variant on the global economy.
• In Japan, financial company, SoftBank Group has shed 4.7%. On the flipside, transport company, Kawasaki Kisen Kaisha (T:9107) has soared 8.5%.
• In Hong Kong, glass manufacturing company, Xinyi Glass Holdings has jumped 4.7%.
• On the contrary, Razer has plummeted 8.6%, amid reports that an association has offered to take it private at 2.82 Hong Kong dollars each.
• In South Korea, Visang Education has surged 8.5%.
• On the contrary, POSCO Chemical (KS:003670) has shed 4.8%.
• The Nikkei 225 index is trading 0.6% lower at 27,774.85.
• The Hang Seng index has advanced 0.2% to trade at 23,700.54, while the Kospi index is trading 1.1% higher at 2,933.99.

COMMODITIES

• At 06:00 SAST today, Brent spot prices rose 0.9% to trade at $69.18/bl, reversing the previous session’s losses.
• Yesterday, Brent spot prices fell 1.7% to settle at $68.58/bl, amid concerns about dampening global oil demand coupled with a surge in the crude supply. Moreover, investors fear that the Omicron variant of coronavirus will affect the OPEC+’s decision whether to continue adding 400,000 bpd in supply to the markets. Meanwhile, the US Energy Information Administration (EIA) reported that US crude inventories fell by 0.90mn bls for the week ended 26 November.
• Yesterday, the Illinois North Central No.2 Yellow corn spot prices rose 1.7% to $5.59/bushel.
• At 06:00 SAST today, gold prices declined 0.1% to trade at $1,779.32/oz. Yesterday, gold gained 0.4% to close at $1,781.73/oz, as worries about a slowdown in global economic growth led to an increase in demand for the safe haven yellow metal.
• Yesterday, copper declined 0.2% to close at $9,492.00/mt. Aluminium closed 1.7% higher at $2,680.75/mt.

CURRENCIES

• Yesterday, the South African rand weakened against the US dollar. In South Africa, a gauge measuring the country’s manufacturing sentiment jumped to a five-month high in November, with business activity and new sales orders improving as the impact of a three-week long strike in the steel and engineering industries subsided. Meanwhile, in the US, manufacturing sector activity expanded in November, but labour remains a challenge. However, US construction spending rebounded less than expected in October as a decline in homebuilding blunted a surge in outlays on public projects.
• The yield on benchmark government bonds were mixed yesterday. The yield on 2026 bond stood at 8.04%. Further, the yield on 2023 bond declined to 5.00%, while that for the longer-dated 2030 issue rose to 9.76%.
• At 06:00 SAST, the US dollar is trading marginally higher against the South African rand at R16.0401, while the euro is trading 0.1% higher at R18.1773. At 06:00 SAST, the British pound has gained 0.2% against the South African rand to trade at R21.3313.
• Yesterday, the euro advanced against most of the major currencies. In Germany, retail sales fell on a monthly basis in October. Moreover, supply chain problems held back growth in German manufacturing activity for the fourth month running in November. Meanwhile, in the eurozone, manufacturing activity stabilised in November following several months of slowing growth, but inflationary concerns were unlikely to be eased for policymakers at the European Central Bank.
• At 06:00 SAST, the euro advanced 0.1% against the US dollar to trade at $1.1332, while it has weakened 0.1% against the British pound to trade at GBP0.8522.

ECONOMIC UPDATES

• On a YoY basis, new vehicle sales climbed 6.6% in November, in South Africa. New vehicle sales had climbed 6.1% in the prior month.
• In November, the manufacturing PMI in South Africa advanced to 57.20. In the previous month, the manufacturing PMI had recorded a level of 53.60.
• In November, on a monthly basis, the seasonally adjusted house prices recorded a rise of 0.9% in the UK. House prices had registered a revised rise of 0.7% in the prior month.
• Compared to a reading of 57.80 in the previous month, the final manufacturing PMI climbed to 58.10 in November, in the UK. Market anticipations were for the manufacturing PMI to advance to 58.20. The preliminary figures had recorded a rise to 58.20.
• In November, the consumer price index (CPI) in Switzerland advanced 1.5% on an annual basis, compared to an advance of 1.2% in the prior month. Market anticipations were for the CPI to climb 1.4%.
• In November, the SVME manufacturing PMI in Switzerland recorded a drop to 62.50, more than market expectations for a drop to 64.40. In the prior month, the SVME manufacturing PMI had recorded a level of 65.40.
• In November, the manufacturing PMI registered an unexpected rise to a level of 62.80 in Italy, compared to a reading of 61.10 in the prior month.
• The final manufacturing PMI in France advanced to 55.90 in November, compared to a reading of 53.60 in the previous month. The preliminary figures had recorded an advance to 54.60. Markets were expecting manufacturing PMI to advance to 54.60.
• The final manufacturing PMI registered a drop to 57.40 in Germany, more than market expectations for a drop to a level of 57.60. The preliminary figures had recorded a drop to 57.60. In the previous month, manufacturing PMI had registered a reading of 57.80.
• On a MoM basis, retail sales in Germany fell 0.3% in October, compared to market expectations of a rise of 1.0%. Retail sales had registered a drop of 1.9% in the prior month.
• The final manufacturing PMI in Eurozone recorded a rise to 58.40 in November, compared to a level of 58.30 in the previous month. The preliminary figures had recorded an advance to 58.60. Markets were expecting the manufacturing PMI to climb to 58.60.
• On a MoM basis, construction spending in the US climbed 0.2% in October, lower than market expectations of a rise of 0.4%. Construction spending had registered a revised drop of 0.1% in the prior month.
• In November, the final Markit manufacturing PMI dropped unexpectedly to 58.30 in the US. The preliminary figures had recorded a rise to 59.10. In the prior month, the Markit manufacturing PMI had registered a reading of 58.40.
• In November, the ISM manufacturing activity index in the US advanced to 61.10, more than market expectations for an advance to a level of 61.00. The ISM manufacturing activity index had registered a level of 60.80 in the prior month.
• In November, the manufacturing PMI in Canada eased to 57.20. In the previous month, the manufacturing PMI had recorded a level of 57.70.
• in October, building permits in Canada rose 1.3% on a MoM basis, compared to market expectations of a drop of 1.0%. In the previous month, building permits had climbed by a revised 4.1%.
• The seasonally adjusted trade surplus in Australia narrowed to AUD11,220.00mn in October, compared to a trade surplus of AUD11,824.00mn in the previous month. Markets were expecting the nation to record a trade surplus of AUD11,000.00mn.

CORPORATE UPDATES

SOUTH AFRICA

• SA Corporate Real Estate Limited: The real estate investment trust company announced the appointment of Sam Moodley as its Chief Financial Officer (CFO) and Executive Director with effect from 1 March 2022. Sam will also fulfil the prescribed function of Executive Financial Director from this date.
• Santam (JO:SNTJ) Limited: The insurance company announced the appointment of Tavaziva Madzinga to succeed Lizé Lambrechts as the Santam Group Chief Executive Officer (CEO). He will be appointed as an Executive Director to the Board with effect from 1 April 2022 and CEO with effect from 1 July 2022.
• Hyprop Investments Limited (JO:HYPJ): The real estate investment trust company announced that the disposal of its indirect shareholding in Delta City 67 d.o.o. Beograd has now been completed and the cash proceeds from the disposal received. The net proceeds of the disposal will be used to reduce debt.
• Emira Property Fund (JO:EMIJ) Limited: The real estate investment trust company, in its pre-close operational update, stated that despite the setbacks caused by the ‘third wave’ and the civil unrest in July 2021, the South African economy continued to show a recovery in the 4-months ended 31 October 2021. The recent emergence of the ‘Omicron’ variant of Covid-19 has created further uncertainty and is expected to temporarily hamper the further recovery of both the local and global economies. The local property market remains challenging, specifically the office sector, and vacancies across the company’s portfolio increased to 7.0% at the end of the period. The team continues to focus on core property fundamentals, ensuring they are performed with excellence. Retaining tenants is one of the team’s key focus areas and 85.0% of the Fund’s leases which expired in the period were retained. Rental reversions for the period improved to a negative 12.0%. Annual lease escalations remain under pressure and reduced marginally by the end of the period to an overall average of 7.0%. The average annual escalations achieved on renewals were 6.9% compared to 7.2% on new leases. The Fund collected R2.10mn of deferred rentals in the period, being R0.50mn of the deferrals billed in the period and R1.60mn of the brought forward arrears.
• Emira Property Fund (JO:EMIJ) expects competition to retain tenants to rise: Emira Property Fund expects competition to either retain or attract new tenants, to persist among landlords, resulting in negative rental reversions where leases are renewed at lower rates.
• Etion’s profit soars on demand for digital products: Technology group Etion, which reported a more than 12-fold jump in half-year earnings, forecasts further growth in operations the coming 18 months, driven by an upturn in the mining, defence and fibre-optics markets.