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Markets mixed in anticipation of Trump’s state of the union

05 February 2019

Markets mixed in anticipation of Trump’s state of the union

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Market commentary

SA flag Icon
South Africa

The JSE fell on Monday after a slump in retailers continued amid markets waiting for direction from US President Donald Trump’s state of the union address on Tuesday and President Cyril Ramaphosa’s state of the nation address on Thursday. The All Share lost 1%.

US flag Icon
United States

Wall Street gained on Monday, boosted by technology shares ahead of Alphabet’s earnings, the last FAANG stock to post quarterly results. At 20h45 the Dow was up by 0.26%. Today markets will watch Trump’s state of the union address.

EU flag Icon
Europe

European shares were flat on Monday as the banking sector fell following poor results from Julius Baer. Just after the JSE closed, the FTSE 100 had gained 0.20%, while both the CAC 40 and DAX 30 dropped by 0.70% and 0.41% respectively.

HK flag Icon
Hong Kong

Mainland Chinese markets are shut for the week for the Lunar New Year holiday, while the Hong Kong market traded half day on Monday, ahead of this three-day festival.

Japan flag Icon
Japan

The Nikkei climbed on Monday, led by financial stocks following solid economic data from the US. The Nikkei share average rose 0.46% at the midday break.

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Rand

The rand was weaker on Monday, extending losses it suffered over the weekend. At 21h00 a dollar cost R13.40.

Precious metals Icon
Precious metals

Gold prices slipped on Monday as global shares firmed on upbeat economic data from the US and a stronger greenback. At 21h00 an ounce of gold traded at $1 320.75.

Oil Icon
Oil

Oil traded close to $62.75 a barrel on Monday as Opec-led supply cuts and US sanctions against Venezuela’s petroleum industry offset forecasts of weaker demand and an economic slowdown.


Market indicators

Local markets (R)
Index Current level 1 Day move 1 Month move 3 Month move 6 Month move 1 Year move
ALSI 53 391.83 - 1.00 2.38 - 1.24 - 4.93 - 6.04
Gold mining 1 430.54 - 3.81 1.65 26.24 33.00 17.29
Basic minerals 29 799.38 - 0.17 5.46 3.11 6.20 16.72
Industrial index 69 554.63 - 0.87 0.26 - 4.42 - 12.74 - 16.91
Financial 42 729.82 - 2.02 3.39 0.62 0.85 - 2.08
Fin + Ind 30 7 272.88 - 1.29 1.36 - 2.67 - 8.30 - 12.11
International markets (Base currency)
Index Current level 1 Day move 1 Month move 3 Month move 6 Month move 1 Year move
Dow Jones (USD) 25 236.74 0.26 7.57 - 0.65 0.08 - 2.09
S&P 500 PR (USD) 2 724.87 0.68 7.75 0.62 - 3.09 0.62
NASDAQ (USD) 7 345.31 - 0.24 9.52 - 2.01 - 5.24 - 0.58
FT-100 (GBP) 7 034.13 0.20 2.92 - 0.21 - 6.46 - 1.45
Hang Seng (HKD) 27 990.21 0.21 9.25 5.84 2.20 - 11.09
Nikkei 225 (JPY) 20 883.77 0.46 6.77 - 5.92 - 6.35 - 8.44
Paris CAC (EUR) 5 000.19 - 0.38 5.59 - 1.74 - 8.37 - 4.63
Frankfurt (EUR) 5 132.12 - 0.04 3.80 - 2.97 - 11.41 - 12.58
Other markets
Index Current level 1 Day move 1 Month move 3 Month move 6 Month move 1 Year move
Gold ($) 1 320.75 - 0.13 3.05 7.97 8.01 - 1.52
Platinum ($) 819.00 - 0.36 2.25 - 5.32 - 0.61 - 18.34
Brent Oil ($) 62.75 1.39 16.64 - 13.91 - 13.32 - 9.91
Rand/USD 13.40 -0.26 3.91 4.64 1.98 -11.28
Rand/GBP 17.47 0.05 1.73 5.40 0.41 -2.75
Rand/EUR 15.32 -0.15 3.82 4.90 2.82 -2.12
ALBI (R) 649.52 - 0.29 1.62 5.64 4.59 8.31
  1. Some data may be delayed, the above table reflects the latest available information
  2. Performance reported during the first week of each month may be impacted by distributions. Distributions are fully accounted for by the second week of each month


Economic calendar

Local International
  1. ZA: Standard Bank PMI JAN
  2. ZA: SACCI business confidence JAN
  1. EU: Markit composite PMI JAN
  2. US: ISM manufacturing PMI JAN

Source: Reuters, Business Day, Trading Economics


PSG Product Matrix

Fund matrix

PSG Wealth Solutions
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth Enhanced Interest D 3.95 7.97 8.04 8.07 7.77 7.44
PSG Wealth Income FoF D 3.70 7.62 7.96 8.35 7.98 8.27
PSG Wealth Preserver FoF D 0.18 2.73 5.23 5.67 6.10 7.17
PSG Wealth Moderate FoF D - 2.88 - 1.93 3.67 5.22 5.05 6.58
PSG Wealth Creator FoF D - 4.20 - 6.44 1.76 6.08 3.45 5.38
PSG Wealth Global Moderate FF D - 2.57 4.69 3.50 0.00 5.66 5.56
PSG Wealth Global Creator FF D - 4.13 5.49 9.32 4.64 10.84 -
PSG Wealth Solutions ($)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth Global Moderate FoF D - 3.23 - 6.54 3.74 6.12 2.14 2.18
PSG Wealth Global Creator FoF D - 4.37 - 5.24 9.94 10.97 7.22 7.05
PSG Wealth Global Preserver FoF (USD) D 0.34 - 0.65 3.25 6.23 3.39 3.67
PSG Wealth Global Flexible FoF (USD) D - 1.60 - 2.92 9.65 11.73 7.48 6.93
PSG Wealth Solutions (£)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth Global Preserver FoF (GBP) D 0.12 4.93 1.88 8.21 5.80 6.82
PSG Wealth Global Flexible FoF (GBP) D - 1.52 3.54 6.45 13.85 9.67 11.03
PSG Asset Management
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Money Market A 2.98 6.64 7.09 7.22 7.04 6.83
PSG Income A 4.04 8.12 8.46 8.48 7.99 7.77
PSG Diversified Income 2.88 6.63 7.79 7.94 7.93 7.68
PSG Stable A 0.10 2.06 5.65 7.24 6.91 6.96
PSG Balanced A - 3.29 - 2.94 3.27 7.52 6.15 7.09
PSG Flexible A - 2.52 - 2.87 2.83 8.88 7.12 7.99
PSG SA Equity D - 4.39 - 11.62 - 1.60 10.33 - -
PSG Equity A - 4.47 - 7.95 0.25 10.27 4.90 6.25
PSG Global Flexible FF A - 3.64 2.86 2.69 4.37 7.43 -
PSG Global Equity FF A - 4.64 1.45 3.73 6.19 7.56 6.73
PSG Asset Management ($)
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Global Flexible USD A - 4.06 - 8.25 3.21 11.74 4.40 3.70
PSG Global Equity USD - 4.87 - 9.24 4.26 13.49 4.73 3.85
PSG Direct Portfolios
Fund 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Direct Flexible Income 3.26 6.92 7.57 7.65 7.38 7.14
PSG Direct Low Equity - 0.38 1.30 5.04 6.96 6.46 6.65
PSG Direct Managed - 3.32 - 3.36 2.70 7.37 5.91 6.83
PSG Direct Aggressive - 3.46 - 3.46 1.73 8.02 6.27 -
PSG Direct Global Managed - 3.86 2.39 2.22 3.90 6.94 -
PSG Direct Global Aggressive - 4.48 1.52 2.89 5.04 7.03 -
  1. The PSG Wealth Solutions are exclusively available through registered PSG planners and/or advisers
  2. The above information reflects the latest available data at time of distribution, as such product performance data reflects T-2 numbers
  3. Performance reported during the first week of each month may be impacted by distributions. Distributions are fully accounted for by the second week of each month
  4. The PSG Best Ideas Portfolios were renamed to the PSG Direct Portfolios in February 2018

Equity portfolio matrix

PSG Wealth Equity Portfolios
Portfolio 6 Month move 1 Year move 2 Year move 3 Year move 4 Year move 5 Year move
PSG Wealth SA Equity Portfolio -4.98 -6.84 1.67 7.30 - -
PSG Wealth SA Property Equity Portfolio -0.20 -3.83 -1.24 -0.39 - -
PSG Wealth SA Dividend Income Equity Portfolio -3.30 -6.86 5.98 - - -
PSG Wealth Offshore Equity Portfolio (USD) -0.31 -0.10 14.65 14.04 - -
PSG Wealth Managed Volatility Equity Portfolio -7.98 -12.72 -2.45 - - -
  1. The PSG Wealth equity portfolios are exclusively available through registered PSG planners and/or advisers
  2. PSG Wealth equity portfolio performance are shown gross of management fees, but net of brokerage and other trading costs
  3. PSG Wealth SA and Offshore Equity Portfolio Inception date: 30 August 2015
  4. PSG Wealth SA Listed Property Portfolio Inception date: 1 December 2015
  5. PSG Wealth Dividend Income Equity Portfolio Inception date: 29 April 2016
  6. PSG Wealth Managed Volatility Equity Portfolio Inception date: 28 July 2016
  7. PSG Wealth Funds are exclusively available through registered PSG planners and/or advisers


Recent trade ideas

company logo

Share name Share code Release date Recommended exposure is less than Share price Read the full report
0 BTI SJ 01 February 2019 7.50% ZAR 45 770c GBP 2 511p Login to read the full report

Highlights

  • BAT offers a product that has traditionally demonstrated resilience in times of economic uncertainties as it has a strong economic moat and enjoys high brand loyalty.
  • Increased competition from illicit trade, unexpected and significant excise duties, ever-changing litigation, disputed taxes, interest, penalties, and adverse foreign exchange rate movements remain risks.
  • Our research found that BAT remains an excellent company with a well-balanced portfolio of brands that covers all major price points, together with a geographic diversity that mitigates the country-specific risks for shareholders.
  • BAT has recently broadened its brand focus, by investing in Reynalds American Inc (RAI), and gained a material portfolio of reduced risk products.
  • The acquisition resulted in a significant increase in financial gearing.
  • The group’s operations, which includes stable volumes, good margins and consistent healthy cash generation, contribute to our view that gearing is manageable.
  • We believe excessive concerns over FDA regulations is an opportunity to add to BAT’s position as the market re-appraises it’s solid free cash flow profile and new generation product (NGP) upsides.
  • Trading at a forward P/E of 7.95 times (3.3 standard deviations below its five-year average), we feel that the share offers value on a relative and absolute basis.
  • A solid forward dividend yield of 7.9% also supported the share price.


company logo

Share name Share code Release date Recommended exposure is Share price Read the full report
Toyota Motor Corporation 7203: Japan 04 February 2019 6.50% JPY 6 879 Login to read the full report

Highlights

  • Toyota stands out in a sector that currently seems strained.
  • The group is trading in line with its long-term average to the sector, which we feel is justified due to its strong balance sheet, leading technologies and strong cash generation.
  • Given the quality of the operation and low valuation multiples, we believe the downside risk is limited.
  • While consumer confidence and interest rates remain the primary drivers of the group’s prospects, evolving regulation intended to reduce pollution is a tailwind to the growing contribution of hybrids in the portfolio.
  • Toyota and Lexus account for 36% (over a third) of all alternative fuel vehicles in the industry, and its hybrid powertrains will continue to be important to its strategy.
  • As environmental restrictions are being steadily tightened, Toyota is expected to benefit from a global resurgence of interest in global hybrid and electric vehicles (HEVs).
  • European regulations limiting CO2 to 95g/km are to be introduced in 2021.
  • The group plans to reveal 31 new redesigned or refreshed models in the Toyota and Lexus lineups through 2021.
  • This product and dealer-driven strategy and EM sales momentum should sustain volumes despite the uncertainty brought on by trade disputes and tariff negotiation.
  • The full impact of trade tariffs on the groups is still uncertain, but it is likely to translate into higher costs.


company logo

Share name Share code Release date Recommended exposure is Share price Read the full report
Compagnie Financière Richemont CFR: Johannesburg 01 February 2019 3.50% ZAR 9 480 cents Login to read the full report

Highlights

  • Our research shows the share is fairly valued at its current levels, which is why we have a neutral positioning.
  • We can assume, based on growth estimates, that steady improvements in the revenue line and the normalisation of the impact of inventory buy-backs on margins will happen.
  • Traditionally, growth in the luxury goods sector is ahead of economic growth.
  • The luxury goods sector is supported by an expanding middle class and ultra-high net worth individuals in emerging markets (EMs) – particularly China.
  • We are concerned about the sustainability of the group’s strong growth results as we move closer to the end of a global growth cycle and are seeing slower development in China.
  • The group’s fortunes have also been linked to travel flows.
  • The reliance on trading by the group’s distribution partners creates volatility in the top-line performance.
  • The challenges in the wholesale channel should be, to some extent, mitigated by continued expansion in the retail base where management has control over distribution.
  • The e-commerce initiatives are intended to move closer to its customers, but the impact on margins is not yet clear.
  • The group has high barriers to entry given the strength of its Maisons division and improved control over supply chains and distribution, all of which could support the long-term pricing power of its products.
  • With the majority of their costs denominated in Swiss francs, appreciation in the franc is likely to introduce volatility in margins.
  • In addition, SA shareholders should be reminded that the share price will remain a function of the CHF/ZAR exchange rate to a large extent.


Corporate actions

Date Company Share code Expectation
06 February 2019 Cullinan Holdings Limited 5.5 percent Cumulative Preference Shares CULP Cash Dividend
06 February 2019 Ecsponent Limited Class A Preference Share ECSP1 Cash Dividend
06 February 2019 Ecsponent Limited Class A Preference Share ECSP10 Cash Dividend
06 February 2019 Ecsponent Limited Class C Preference Share ECSP12 Cash Dividend
06 February 2019 Ecsponent Limited Class A Preference Share ECSP13 Cash Dividend
06 February 2019 Ecsponent Limited Class C Preference Share ECSP15 Cash Dividend
06 February 2019 Ecsponent Limited Class C Preference Share ECSP18 Cash Dividend
06 February 2019 Ecsponent Limited Class C Preference Share ECSP21 Cash Dividend
06 February 2019 Ecsponent Limited Class C Preference Share ECSP24 Cash Dividend
06 February 2019 Ecsponent Limited Class C Preference Share ECSP3 Cash Dividend
06 February 2019 Ecsponent Limited Class A Preference Share ECSP4 Cash Dividend
06 February 2019 Ecsponent Limited Class C Preference Share ECSP6 Cash Dividend
06 February 2019 Ecsponent Limited Class A Preference Share ECSP7 Cash Dividend
06 February 2019 Ecsponent Limited Class C Preference Share ECSP9 Cash Dividend
06 February 2019 Howden Africa Holdings Limited HWN General Offer
06 February 2019 Nu-World Holdings Limited NWL Cash Dividend
06 February 2019 Peregrine Holdings Limited PGR Cash Dividend
  1. The information above is to the best of our knowledge correct at the time of distribution but due to the nature thereof cannot be guaranteed.
  2. This document only contains general information and not the opinion of the distributor.

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Author
author

Adriaan Pask PhD

Chief Investment Officer


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