Meryl Pick discusses a more upbeat JSE this week, supported by a stronger rand, commodities stocks, and Naspers and Prosus, as well as the possible underlying drivers of this improved performance.
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Meryl Pick discusses a more upbeat JSE this week, supported by a stronger rand, commodities stocks, and Naspers and Prosus, as well as the possible underlying drivers of this improved performance.
Thanks for listening! Follow us on Linkedin.
Bruce Whitfield 00:08
And Meryl Pick is a Portfolio Manager at the Old Mutual Investment Group. Good day for the Rand, good day for markets generally, Meryl, not a bad way to start the week.
Meryl Pick 00:09
Yes. Good evening, Bruce. And good evening to your listeners. We saw, I think, a bit more of a risk on day today. Strong Rand, strong commodities, and the JSE being supported by both the commodity shares and Naspers, Prosus. I mean, one can always speculate as to why these things are happening. Locally, we did see a turnaround in the employment figures. So, that's a positive, you know, recently, we've seen ratings agencies update their outlook to stable. And then I think also globally, on the US front, we saw strong jobs print last week, even though interest rates have been going up, which perhaps just quells some of the recession fears just a bit that have been doing the rounds in the market, that the US would be going into recession at some point.
Bruce Whitfield 01:16
But I mean, deals are starting to fall over. It was interesting, because so many deals were being done in the South African environment. Now, Hulamin today disclosing that it was in negotiations, it announced this deal, I think, it was probably nearly a year ago now, April last year - ja, more than a year ago. And finally, that deal's just not gonna happen. The environment is too unsettled, the environment is too scary. And the company says that deal is off the table and the share price collapsed.
Meryl Pick 01:42
Yes, indeed. So, you know, it's not the first deal that we've seen fall through. I think, some months ago, we saw a buyer walking away from AVI. I think there's two ways to look at it, Bruce. So, the glass half full way, is to say that there are South African businesses that are interesting to investors, global investors, private equity investors. And, you know, that means that there are pockets of our market that are still undervalued, and that are not being appropriately priced in public markets. I suppose the other way to look at it, the glass half empty way, is that global uncertainty has gone up, certainty with the Russia/Ukraine conflict, with the US talking about tightening, and liquidity raising rates. So, there is certainly a bit of a gray cloud building over global growth on the next three-year horizon. And that is a more difficult climate within to invest.
Bruce Whitfield 02:51
Ja, the environment is difficult. It is tough. And I look at this with a great deal of interest. And it's interesting, I mean, look at the big drop off in the share price of Gold Fields, and see executives including Chris Griffith, have been buying shares. Chris Griffith has spent R3 million on shares. And that share price has fallen by... I think it's lost about a quarter of its value since it announced last week that it wanted to buy a Canadian gold mining company, which if it was successful, would make it, I think, the fourth biggest gold mining company in the world. But the market really has revolted against the Yamana gold proposal, which was made last week.
Meryl Pick 03:27
Indeed, I think part of the reason for that is the funding of the deal, which would be done with shares. So, the initial impact is quite dilutive for shareholders. I mean, this deal would still have to go to a vote. And then one could question, you know, whether the timing is right in terms of the gold price. So, there gold price is off its highs that we saw in 202, but it's still at quite elevated levels compared to the previous decade. One can make bull and bear arguments for why the gold price should go back over 2,000 or not. But it's certainly difficult to make a case that this is the bottom of the cycle, that they would be getting a bargain buy in Yamana, and it's quite a big - it's quite a big deal. So, I think the Gold Fields' investment case was looking almost attractively boring if that makes sense. Just had a very well-run portfolio that had issues in the past, the South Deep mine, and those had come under control. Everything was just boring. They were just going to chug along and print cash and take advantage of the gold price. And they just couldn't sit on their hands. They've got to go out and buy something.
Bruce Whitfield 04:46
It is the curse of the cycle. Thank you, Meryl Pick, Portfolio Manager at the Old Mutual Investment Group, on the line to us this evening from Cape Town. Thank you, Meryl Pick.