Markets WRAP: Rand closes at R15.22/$

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26 Aug 2019

The rand closed at R15.22/$ on Monday. Here's how the day wrapped up. 

USDZAR 15.2217

EURUSD 1.1112

EURZAR 16.9059

GBPUSD 1.2221

GBPZAR 18.5932

AUDZAR 10.3076

CADZAR 11.4461

CNYZAR 2.1274

ZARJPY 6.9587

CHFZAR 15.5532

R186 8.27%

US 10 Year 1.52%

JSE -0.41%

S&P 500 0.52%

Brought to you by TreasuryONE

26 Aug 2019

Naspers says Prosus unit to be valued at about $100 billion

Loni Prinsloo and Renee Bonorchis, Bloomberg 

Naspers has said a newly created entity containing assets including a stake in Chinese internet giant Tencent will be valued at about $100 billion.

Africa’s largest company by market value received shareholder backing last week to proceed with the listing of Prosus in Amsterdam next month.

Alongside the Tencent stake, the new company will hold businesses from Brazil to Germany in industries such as online food delivery and classified advertising.

A value of $100 billion would make only Royal Dutch Shell and consumer-goods giant Unilever bigger in Amsterdam by market capitalisation.

The company would overtake ASML Holding NV, a semiconductor gear-maker priced at about 80 billion euros ($89 billion). Naspers opted to spin off Prosus -- in which it will keep a 73% stake -- to ease its dominance of Johannesburg’s stock exchange and help reduce a valuation gap between the Cape Town-based company and its stake in Tencent.

The new group’s assets were valued at about $34 billion as of end June, Naspers said in a statement on Monday.

Naspers shares erased gains after the publication of the anticipated market value of Prosus, and traded 0.1% higher at R3 421.11 rand at 11:52 in Johannesburg.

* Fin24 is part of Media24, a subsidiary of Naspers 

26 Aug 2019

Oil jumps after Trump says China wants to restart trade talks

Matthew Martin and Mahmoud Habboush, Bloomberg

Oil jumped after US President Donald Trump said that China wanted to restart trade talks, potentially easing escalating tensions between the two countries.

Futures in New York rose as much as 0.8%, snapping the longest run of declines in more than five weeks.

Trump’s comments reversed a drop of as much as 2.2% that had looked set to continue the streak of losses for a fifth day.

Trump’s words cooled concern that China’s plan to halt purchases of American crude and threats of tougher US levies would worsen an already shaky global demand outlook."China called last night our trade people and said let’s get back to the table," Trump told reporters at the Group of 7 meeting in Biarritz, France.

“We’re going to start very shortly and negotiate and see what happens but I think we’re going to make a deal.”

26 Aug 2019

Impact of trade war beyond control of central banks - Jerome Powell

US Federal Reserve Chairperson Jerome Powell on Friday said that the impact of the trade war is beyond the control of central banks. His statement in turn impacted markets, Andre Botha, senior dealer at TreasuryONE noted in a market update.

"On that point is where gold and silver were won on Friday.

"First, China imposed retaliatory tariffs of between 5% and 10% on $75bn worth of US imports as well as reinstating a 25% tariff on US automobiles and parts. When the news broke, we all waited for the reaction of President Trump, as we all know that a reaction was coming.

"Trump, true to form, ordered US manufacturing companies to leave China. He further increased tariffs on $250bn Chinese imports from 25% to 30% and on a further $300bn from 10% to 15%," Botha said.

Subsequently the rand bouncing from the post-Jackson Hole level of R 15.10 to end the session testing the R15.30 level.

"We have seen broad-based 'risk-off' sentiment flooding the markets with equity indices leading the way.  

"Wall Street closed down sharply on Friday with the S&P down 2.59%, the Dow down 2.37% and the Nasdaq down 3.0%. US futures are even further in the red this morning.

"Asian stocks have fallen sharply as well with the Hang Seng down 3.08% as protests in Hong Kong turn violent and the Chinese government hints at possible intervention," Botha added.

"The rand tested the R15.45 level this morning during the major sell-off but markets seemed to calm down later in the Asian session as the market took a breather conciliatory remarks from both the US and China while fresh US-Japan trade optimism also helped ease some nerves.

"We have seen the rand retreating back to the R15.30 level but looking vulnerable on the back of safe-haven currencies rallying hard at the moment," Botha concluded.

26 Aug 2019

Trump regrets not raising tariffs on China higher - White House
<strong>Trump regrets not raising tariffs on China higher - White House</strong>

26 Aug 2019

NKC Economics Data preview:

Monday: US durable goods orders are expected to have risen by 1.1% m-o-m in July following a 1.9% m-o-m advance in June that was mainly due to a large rise in aircraft orders.

Tuesday: After unexpectedly rebounding to an 8-month high in July, consumer confidence is expected to ease to 128.0 in the August reading.

Thursday: We forecast local producer price inflation slowed to 5.2% y-o-y in July. In terms of US economic growth, the latest economic data signals that Q2 real GDP growth will be revised down 0.2ppt to 1.9% from 2.1% in the first estimate.

Friday: M3 money supply growth is forecast to rise at a steady rate of 9% y-o-y in July, while private sector credit extension (PSCE) growth is forecast at 7.4% y-o-y in the same month. Will see the release of local merchandise trade data for July. South Africa recorded a merchandise trade surplus of R4.4bn in June, in line with market expectations.

26 Aug 2019

Rand at 'considerable risk'

The rand, was not the worst-performing emerging market currency last week, however it is still at considerable risk, said head of RMB Global Markets Research Nema Ramkhelawan-Bhana.

"Having breached R15.44/$ in early-morning trade, there’s little support below 15.30, particularly amid a fragile domestic socio-economic environment.

"Having largely resisted the rand moves on Friday, domestic-bond yields might latch onto the local currency – especially as the impact of July’s local inflation print starts to fade," she said.

This week local data releases include Producer Price Inflation, trade and the monthly budget stats. But their impact may fall by the wayside if global risks escalate, Ramkhelawan-Bhana explained.

"Changes in resource prices could serve SA’s trade balance well as the gold price continues to run rampant, maintaining at US$1,540/oz, while the oil price languishes below US$60/bbl.

"Domestic news headlines could distract from any positive data, with the number of parliamentary committees due to testify and the tax indaba underway," Ramkhelawan-Bhana added.

26 Aug 2019

JSE to acquire 74.8% stake in Link SA

The JSE has agreed to acquire a 74.85% stake of Link Market Services South Africa (Link SA), the stock exchange said in a notice to shareholders on Monday.

Link Market Services is a company incorporated in Australia. The entire shareholding of Link SA is held by Link Australia. The JSE's acquisition is subject to regulatory approvals.

"Link SA is the second largest share register business in South Africa, and has a client base that includes six of the top 40 issuers.

"The proposed transaction supports the JSE's strategy to strengthen its relationships with its issuers and to grow sustainably across the issuer services value chain," the notice read.

The proposed transaction will also result in Link SA's Black Economic Empowerment partner retaining its existing 25.15% in the company, the JSE said.

"Iqbal Haniff will remain as CEO of Link SA, and the company will retain its level 2 BEE rating post the transaction."

The transaction will cost R224.5m  and will be paid from the group's cash reserves.

"The proposed transaction is revenue accretive with an expected contribution of approximately 6% of group revenue, while exceeding the group's return on investment hurdles," the notice read.

The transaction is expected to be concluded by December 31, 2019.

26 Aug 2019

Equities, yuan plunge as Trump escalates trade war with China

Asian equity markets tanked and the yuan hit an 11-year low Monday after Donald Trump ramped up his trade war with China by imposing more tariffs on more than half-a-trillion dollars worth of imports.

The decision on Friday stunned investors, who ran for the hills, hammering European and Wall Street stocks, while safe havens such as the yen and gold - go-to assets in times of turmoil and uncertainty - surged.

The move, which also came with an outburst against China by the American president and a call for US firms to leave the country, overshadowed a broadly dovish speech by Federal Reserve boss Jerome Powell but one that fell short of Trump's demand for deep interest rate cuts.


26 Aug 2019

Trade war escalates, emerging markets stumble

The rand weakened as news of the trade war escalating resulted in a risk-off sentiment by markets, Bianca Botes, Treasury Partner at Peregrine Treasury Solutions noted. 

"China and the US are at it again, playing the tit-for-tat game as the trade war escalates once more. A few hours after China announced a tariff on $75bn worth of US goods, the US declared an additional 5% tariff on $550bn worth of Chinese goods.

"The escalation sent markets back to risk-off territory, with gold reaching a six-year high while emerging markets stumbled," she said.

"Markets are also keeping an eye on the G7 summit, and US durable goods orders due for release today.     

"After slipping 0.8% overnight, the rand starts the day at R15.35/$, R17.12/€ and R18.85/£," she added.

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