Jsedirect With Simon Brown

Simon Shares Tencent hit a new all-time high on Tuesday and again on Wednesday pushing Naspers (JSE code: NPN) and Prosus (JSE code: PRX) higher and helping the JSE overall. Gold seems to be breaking up out of the consolidation zone it has spent the last few months trading in. Good German PMI data, still under 50, but only just again suggests that April was likely the worst month. Albeit the route back to normal is going to be long and rocky. Mboweni budget; No changes to taxes, but a rough budget. Some key points; The South African economy is now expected to contract by 7.2% in 2020. This is the largest contraction in nearly 90 years. Global GDP -5.2%, broadest collapse in per capita income since 1870 "A post‐lockdown future will require that we build high‐quality physical bridges, roads, railways, ports and other infrastructures.". Some changes in the R200bn Covid loan scheme. Removed the R300m turnover limit. South Africa will "shortly" fall into a sovereign debt crisis if it does not act urgently.

/ Wirecard and the missing $2.1bn / Hertz decides NOT to issue shares while under chapter 11 / Reports on Sunday that British Finance Minister Sunak plans emergency cut in value-added tax / Index rebalancing in the Russell indices sees nearly half of the stocks being promoted to the Russell 1000 from the Russell 2000 will be healthcare names. / Apple will close 11 stores across Florida (2), North Carolina (2), South Carolina (2) and Arizona (6). This after re-opening 100 in May. / Fed Chair Jerome Powell warned millions of people will likely still be unemployed even as the economy is on the path of recovery. / The Federal Reserve started buying corporate bonds Tuesday as part of a $250 billion program funded by the CARES Act Local / New level 3.something opens leisure and beauty (to a degree) / Marriott Group closing three hotels (Mount Grace, Protea Hotel by Marriott Hazyview and Protea Hotel by Marriott Durban Edward). The hotels are owned by Hospitality Property Fund. / Sasol update, lots of news but not o

Simon Shares Here's a gem from the Herenya Capital Advisors Twitter account, albeit Remedica is up for sale and we've had lots of early hype on drugs that quickly fizzled out. Ascendis Healths subsidiary Remedica manufactures Dexamethasone which apparently helps combat severe cases and is being approved by the NHS. pic.twitter.com/XUw9VPHwdg — Herenya Capital Advisors (@HerenyaCapital) June 17, 2020   That said, Aspen (JSE code: APN) issued a SENS stating "It is confirmed that Aspen owns rights to this product and distributes both injectables and/or tablets containing dexamethasone in a number of countries." But most importantly, is it really a new wonder drug to treat Covid-19 (dexamethasone). Because ouch, you need to already be in ICU and then if you're on a ventilator it saves 1:8 (12.5%) and of those needing oxygen, it saves 1:25 (4%). Aren't those very modest numbers? On MoneywebNOW yesterday I chatted with Easy Equities CEO, Charles Savage and he dropped some amazing stats. They're opening 1,500-

Offshore / China's PPI down 3.7% in May and factory output rises less than expected, retail sales continued to contract in May. / Fed kept interest rates flat and cautioned they expect conditions to remain tough into 2022. GDP 5% in 2021 and unemployment 5.5% in 2022 o S&P500 dropped -4.8% last week but remains +8.1% this month, o Nasdaq dropped -2.3% last week but remains +6.4% this month, o FTSE 100 dropped -5.9% last week but remains +5.3% this month, o JSE Top 40 Index dropped -1.9% last week but remains +5.8% this month, / We’re starting to see the second Covid-19 wave in both the USA and China and this spooked markets. Detroit, Michigan is seeing new all-time case highs / Mnuchin says ‘we can’t shut down the economy again’ / UK economy contracted by 20.4% in April, the largest monthly fall on record / Justeat-takeaway buys GrubHub Local / The Rand hit 16.33 overnight on Wednesday but then came under serious pressure at 17.20 on Friday. / Solid Multichoice results and first dividend payment as sports

Simon Shares Bankruptcy stocks are the new excitement in the US. Hertz in chapter 11 saw its stock price back at the levels from when it announced Chapter 11. Tsogo Sun Gaming (JSE code: TSG) results to end-March show debt at R11.2billion, more than double the market cap. EOH (JSE code: EOH) update says debt is being paid off quicker than planned. But it remains a long road for the company. British American Tobacco (JSE code: BTI) update sows solid DM demand but reduced EM demand. Hyprop JSE code: HYP) update details foot traffic and open rates with their malls between 67% (Hyde Park Corner) and 97% (Atterbury Value Mart). In large part, the number depends on the number of sit down restaurants. Foot traffic was down 71% in April and in the first seven days of June is now only down 24%. Again this shows that April was very likely the worst point and that things are improving, but the last stretch of improvement is going to be the hardest. China's PPI down 3.7% in May. China is opening but exports are struggl

Global / US May unemployment rate seriously strong at 13.3% / PMI bounces from April lows but still below 50 / China May exports slip back into contraction, imports worst in four years / Opec extend cuts by another month / AstraZeneca Approaches Gilead About Potential Merger local / Apple mobility and Yoco transaction data shows about 65% economic activity in week 1 of level 3 / JSE allows share issues without shareholder approval / Rand below 17 as foreigners buy our bonds and equity / Reserve Bank takes up R10.2bn in government bonds in May / More banking updates / Bidvest update gives insight to Comair and Adcock Ingram / Capital Appreciation solid results and increased dividend as they operate in payment terminals and cloud services (there are always some winner) ==== Levi opening stores and they say “everybody has a new size, a larger size”

Upcoming events; 09 June ~ South China Seas structured product Q&A 10 June ~ Margin, gearing & exposure explained 17 June ~ Trading 101: A traders plan 18 June ~ What it means to Invest Globally, Locally Simon Shares Day 70 of lockdown, week 1 of level 3 and I got drink (still no smokes) but court locks down lockdown? Markets are surging, taken off flying and chasing the stars. Overall value is decent but not spectacular. Coupled with the ZAR at 17 we likely have a risk on trade and some epic sort squeezes. The general view for the currency is at least 16 in the short-term maybe stronger but as always, be careful because this can turn on a dime. Of course, my crash puts are getting slaughtered in this run, but that's the plan. if my cash puts are losing then my portfolio is winning. WTI and Brent both having a good week with the latter back above US$40. Sasol (JSE code: SOL) the easy winner here, likely based on higher oil and short squeezes. Will it close the gap at R160? Certainly, the possible

Global / US past 40million initial claims and Q1 GDP updated to -5.0% from -4.8% / Personal saving rate 33% in April / Germany’s Business Climate Index rose to 79.5 in May as the country reopens / Reuters ~ China's May factory activity returns to growth but demand remains weak / China US tensions increasing / Bill Ackman's Pershing Square Capital Management announced it had sold off its entire stake in Berkshire Hathaway. BH has $133.3 billion hoards of cash vs S450 market cap (third of assets are lazy and not been deployed). Local / PSG announced CPI unbundling details (14 CPI for every 100 PSG) / Woolies update, spending AU$100million on Australia / TigerBrands results as branded goods come under further pressure. / Famous Brands very pessimistic on casual dining recovery / Stats SA delayed April CPI by a month due to difficulty collecting data / PIC talking about converting Eskom debt to equity

Simon Shares Day 63 of lockdown, level 3 on Monday. As I record we're still waiting for details as to what is allowed under level 3, but it seems that rather than saying what we can do, the regulations will tell us what we can't do and that list will be short. We will be able to exercise, retail is open but restaurants and bars not. Alcohol will be sold, but not tobacco products. Personally I will pretty much stay in lockdown (aside from my daily radio show), but now with a drink. NYSE trading pit opened again on Tuesday. A throwback to the days before technology but always fun to watch, not that I have been to the NYSE. I did see the JSE in the mid 80's on a trip to Johannesburg. It was wild and made no sense to me but it was energetic and I wanted to be a part of it all. Famous Brands* (JSE code: FBR) results presentation made two comments “restaurant landscape will be irrevocably transformed” because of Covid-19. The market recovery in the casual dining segment will be “slow and unforgiving”. Woolies (JSE

Offshore / Hertz bankruptcy / US initial jobless claims now over 38million (160m labour force), UK ver 10million (35million labour force) / This on the back of German Q1 GDP released this morning coming in at -2.2% / Moderna vaccine excitement, and then they raise capital on share price spike / Commodities having another good week. / Apple mobility data shows Europeana and US economy opening. Local / 0.5% rate cut / Stor-age raises R250m in bookbuild. / Grand Parade Burger King sale being repriced? / Liberty 2 Degrees update, nice insights. / Nedbank update also offering solid insights. / Richemont raises Euro2billion debt as they strengthen their balance sheet / Online sales surging

Upcoming events; 21 May ~ Solvency and liquidity in the time of COVID-19 28 May ~ Managing risk as a trader with Garth McKenzie 03 June ~ Pandemic investment scenarios 10 June ~ Margin, gearing & exposure explained 18 June ~ What it means to Invest Globally, Locally Day 56 of lockdown Simon Shares Don't fight the Fed (The Federal Reserve). Markets are in full rally mode and the forward PE of the S&P5- makes it the most expensive in the last decade. During a pandemic and worst US unemployment since the great recession? Bu the point is simple, if the Fed is buying with guns blazing, don't stand in the way, markets will rally higher even if everybody I speak to is bearish. With that in mind, I have bought some TOPSBZ as insurance against another market collapse. It is a put warrant over the Top40, expiry is December and strike is 41,000. So a decent amount of time and about 18% out-the-money. Richemont (JSE code: CFR) raises Euro2billion of cheap debt to go with their almost Euro2.4billion of cash o

**Global** / UK two-year government bonds traded negative last week as UK GDP -2% for Q1, -5.8% for March & retail sales fall 19% year on year. Biggest in 25 years / Tencent’s Q1:20 results showed a +19% jump in gaming subscriptions, overall Group revenue grew +26% and, on almost all metrics, the Group beat analyst estimates. / US, jobless claims came out as another nasty number today, now totally around 36m (the worst number since the Great Depression) while April retail sales collapsed -16.4% m/m. **Local** / Barloworld is attempting to back out of its deal to buy Tongaat Hulett’s Starch business due to COVID-19 likely negatively impacting the business’s EBITDA and triggering a “Material Adverse Clause”.  / Dis-Chem announced the acquisition of 100% of Baby City / Richemont released FY 20 results showing revenue flat but profits collapsing by two-thirds. and are proposing a possible warrant instead of a dividend / Strong Aspen update while Life healthcare says EPS for full year likely 20% lower after m

Simon Shares Day 49 of lockdown Pick 'n Pay (JSE code: PIK) results were slightly down, but no dividend as they conserve cash. Sibanye Stillwater* (JSE code: SSW) first quarter results knock it out of the park, strong cash flow and debt down 40%. Tongaat (JSE code: TON) sale of their starch business to Barloworld (JSE code: BAW) has collapsed with the buyer claiming "material adverse change" due to COVID-19. UK two-year government bonds traded negative this week. UK GDP was -2.0% for the first quarter (QonQ) with March saw a 5.8% contraction. Retail sales fall 19% year on year. Biggest drop in 25 years as 'excess deaths' top 50,000 but look to maybe have peaked, for now. Norway oil fund exits Anglo American (JSE code: AGL), Glencore (JSE code: GLN) & Sasol (JSE code: SOL) as they "derive at least 30% of their income from thermal coal, base at least 30% of their operations on thermal coal, extract more than 20 million tons of thermal coal per year, or have a coal power capacity of more than 10,000 megaw

Global / Worst US unemployment since the depression, but lagging indicator. Likely 25% by end May / Last weeks PMI, local and global mostly setting records for worst ever / Nasdaq is up year-to-date / IMF warning that their 2020 GDP forecasts may be too low? Local / Comair business rescue / Phumelela Gaming business rescue / Our bonds are strong, 10 year at 9.3%, shorter dated below 8% / Anheuser-Busch InBev QoQ volumes down 9.3% / Property stocks and risk of losing REIT status

This week’s episode of JSE Direct is courtesy of OUTvest, our preferred supplier in retirement products. Simon Shares April was the best month for equity markets since 1987! Local ten year bonds are on a tear, just a week after we exited the World Government Bond Index the yields are back at pre-junk levels and even better as they trade below 8%. This is the search for yield playing out. If their mandate allows investors want yield, the rest they don't care about. This has also seen the Government Retail Bonds locally drop their April rate of 11.5% to 10% for May and likely will fall further in June. PMI shocker. The headline number was fine but that was due to some oddities. The real kicker was the business activity index that collapsed to an all-time low of 5.1 index points in April. During the 2008/9 crisis the lowest levels were low 30s. Oil bouncing higher, albeit at US$30 Brent is still over 50% off the January levels. Comair (JSE code: COM) went into business rescue less than a week after an update d

Simon Shares Moneyweb NOW, starting Monday. Live stream at 6.30am and podcast from 7am - both on Moneyweb.co.za or their app. Day 35 of lockdown, and last day of level 5, for now. S&P500 trading back at August 2019 levels and Top40 at January 2019 levels. So basically saying COVID-19 is no worry? Everything is going to be alright? Sure the US has thrown over US$2trillion at the problem, but some 13% of the US workforce has lost a job in the last month and it easy to fire, but will surely be a lot slower to rehire? This is why I am at best a W recovery person not a V shaped. We have another leg lower, no idea how much lower, but lower. Locally a Stats SA survey of 707 VAT-registered companies shows that 20% have already laid off staff and 30% have decreased working hours. We also see IMF forecasting a local GDP of -5.8% and an unemployment rate of 35.3% for 2020. Then 34.1% unemployment in 2021. These are horror numbers and if they're wrong, they be wrong on the light side with reality potentially worse.

Simon Shares Day 28 of lockdown. Oil, negative pricing? I thought I'd seen it all when interest rates went negative, but no ~ oil says "hold my beer". I Tweeted about it. Short version, don't now suddenly decide you are an oil trader. Overnight WTI Oil (West Texas Intermediate) traded at a negative $40. Yip -$40, traders were paying you to take their oil off their hands. Totally wild and now everybody wants to be an oil trader. But some caution before you jump in. 1/ — Simon Brown (@SimonPB) April 21, 2020   Bye-bye SAA. Staff have essentially been given termination letters for end April by the business rescue practitioner, payment subject to the sale of assets and this is the worst time ever to be selling airline assets. But public enterprises minister, Pravin Gordhan, has other ideas, a new “financially viable airline”. This in the middle of a pandemic when US airlines got US$25billion, and they want more? But here's the fun part, while the minister and government is insisting no new money, the bus

Lockdown day 25 22million unemployment claims in US in 4 weeks (entire 2008 saw only 8.8million) opening economy China GDP fell by 6.8% YoY in Q1 (first fall since 1992) Wall Street gained 15% in the past two weeks, its strongest fortnight in 80 years. Oil price .. crude oil getting smashed as global storage fills up Earnigs season kicks off in US this week, includes March so some sense of impact but not entirely Goldman Sachs cuts Apple to sell & cut its price target to $233 from $250 as it sees revenue dropping a third Amazon trading at all time highs Big cabinet meeting today (Monday) End of the road for SAA (US airlines getting $25bn, and that not enough) Another 1% repo rate cut, but still SARB expects SA to contract by 6.1% this year Treasury looking to borrow $60bn, potentially from IMF

Lockdowns being extend everywhere (Spain +15 days, Italy +2 weeks, US wait and see, but likely end April) ZAR blowing out US jobless claims 6.6m this week Unemployment at 4.4%, non-farm payroll down 701k jobs (first down in a decade), -100k expected Numbers don’t add up, latter is only to mid March Lots of lagging data, two issues here, one is data coming out at record worst, and even just a 1 month delay makes data largely useless Woolies update Famous Brands bails on GBK Spur suspends franchise fees amid Covid-19 closures Nampak gets their R1.5billion for selling glass biz Anchor reports record demand for fixed-income assets British American Tobacco working on COVID-19 vaccine

Simon Shares New weekly podcast in the RSS feed every Monday late morning. BUT only in the RSS feed, not on the website. So subscribe to the feed, it is here. Upcoming events; 09 April ~ JSE Power Hour: Trader’s game plan Lockdown, day six as I record (seven as you listen). COVID-19 numbers globally continue to rise, but I'm watching Italy. They're now at three weeks of lockdown and are seeing daily new cases decline, but still at 4,000 a day. I am also seeing reports that they'll extend lockdown to after Easter, which is bad news for us. Our new cases are minimal, but still likely to spike higher and come the end of three weeks surely we'll be winning but not wanting to let the virus back in the front door, so lockdown extended? My thinking is extended to first weekend in May. It's after the two public holidays and means we'd have been in lockdown for 5 weeks. Longer term we're waiting for a vaccine, and that's 2021 at best, so even if lockdown gets lifted, heavy restrictions will be the norm and new lock