5 things you need to know in SA business today and how the JSE reacts to elections
1. Global markets slumped yesterday after US president Donald Trump tweeted that tariffs on $200 billion worth of Chinese goods would increase to 25% from 10% and that an additional $325 billion worth of Chinese goods would be hit with 25% tariffs on Friday. This was confirmed by US Trade Representative Robert Lighthizer, who said the increase was triggered by China's sudden reversal on key agreements in trade talks. "Over the course of the last week or so, we have seen an erosion in commitments by China, I would say retreating from specific commitments that had already been made," Lighthizer said, adding the reversal is "unacceptable."
The JSE ended more than a percent lower, with Naspers and large banks taking the biggest hits. The rand was last trading at R14.44/$.
2. Steinhoff’s restated 2017 financial results are due to be released today, after long delays. The multinational retailer announced back in mid-December 2017 that investors could no longer rely on its 2017 and 2018 results, after its auditors flagged accounting irregularities in its books and its CEO Markus Jooste abruptly stepped down. The 2018 results will be released next month.
3. The Financial Services Conduct Authority (FSCA) has cleared the embattled property group NEPI Rockcastle from allegations that it intentionally or negligently publishing false statements about its performance in its 2017 financial statements. The only outstanding investigation into the company relates to insider trading. NEPI Rockcastle shares were savaged last year after short sellers Viceroy Research accused it of overstating its profits from Romania.
4. Massmart’s CEO Guy Hayward (52) has resigned unexpectedly and the company didn’t give a reason. Walmart-owned Massmart, which counts Makro and Game in its stable, reported a 23% fall in its profit in the past year, while its total sales grew 2.9% to almost R91 billion.
Massmart CEO Guy Hayward has informed Board of his decision to step down at end of year.....while I can’t blame him given his 20 years there, I didn’t see this coming! Wonder who the energetic, multi-skilled soul will be that is required to take over this business in transition..— Delphine Govender (@Delphine_DG) May 6, 2019
5. Despite a couple of incidents, the Electoral Commission of South Africa (IEC) is satisfied with yesterday's first day of voting. Special votes will continue on Tuesday with the majority of South Africans heading to the polls on Wednesday.
News24 reported that ballot boxes had been found on the streets of Tzaneen, Limpopo. The IEC is investigating. Meanwhile, at voting stations in Ginsberg, outside the Eastern Cape town of King William’s Town and Idutywa, election staff and voters were prevented from casting their ballots due to community unrest.
For more election coverage, go to News24's 2019 elections hub.
How the JSE reacts to elections
History shows that in the six months after national elections, South African shares usually enjoy a solid rally.
The trader Karin Richards shared a graph depicting the JSE's all share index performance from just prior to the elections in recent years, to six months thereafter:
The post-election bump has ranged from 3.6% in 2014 and 9.3% in 2004, to 27.3% in 1999 to 29.6% in 2009.
What will happen this year?
A recent survey among professional investors by the research group Intellidex shows that almost 63% of the participants expect that if the ANC wins by a large enough majority, that will give president Cyril Ramaphosa a mandate to push through economic reforms – and that this will give the rand and shares a boost.
And for those who believe in this “mandate threshold”, the magic level that will trigger a rally seems to be 58.3%. If the ANC secures more than that in the national vote, they expect the rand, bonds and shares will rally.
However the fate of a small market like South Africa is always at the mercy of global forces - and currently, with a trade war brewing between the US and China, even the most market-pleasing election result may come to naught.
Receive a single WhatsApp every morning with all our latest news: click here.
Also from Business Insider South Africa:
- The 10 most expensive streets in South Africa - where the average house costs you more than R20 million
- Climate change has a bright side too: How SA plans to put a positive spin on global warming
- Single women are now the biggest group of property buyers in South Africa – larger than couples and single men
- Why Telkom will not yet invest in 5G – and when 5G will be available at Cell C, Vodacom, MTN, and Rain
- Uber is offering discounts on trips to polling stations on Wednesday – even if it is being slightly cheap compared to 2016