Brexit Pounds ALSI 40

“So which stocks here are dual listed in London? Stocks that have primary listings in the UK and a secondary listing here. And then also, which companies do a fair amount of business in the UK? For the purposes of this exercise, let us look at the majors only, the stocks inside of the ALSI 40.”


 

To market to market to buy a fat pig There wasn’t much on the go here locally yesterday, not much by way of company releases and not too much going on around the globe. A settling of the nerves somewhat after the markets were jolted by Deutsche Bank and their string of woes last week. I bumped into Kevin Hedderwick and Karen Short at the JSE at lunchtime yesterday, they looked pleased with themselves and I wished them well. I couldn’t get too much out of it other than a well done and a how are you. Talking over a two year period led to the listed business taking a nearly even stake in the entrepreneurial business. Established at that, the catering business By Word of Mouth has been around since 1993. And good for them, a half a life’s work being cashed in at some level.

It certainly doesn’t mean that Karen and By Word of Mouth are going to sit on their hands, this is the next phase in the progression of the business. Famous Brands want to have By Word of Mouth stores in high end shopping centres. You can get all of your stuff pre-made and it isn’t take out, in a sense it is a home cooked meal. Home cooked meals from quality manufacturers is in short supply. You can get it from your supermarket and food retailers like Woolworths, Spar, Pick n Pay as well as Checkers, they all have their offerings. There is however still a huge gap that exists for people to eat healthy, where time is still at a premium. Good work for all concerned.

The other news of the day, not on the local front, was the “used to be Great” British Pound sinking to levels not seen in 31 years, relative to the USD. Yowsers. Why? The new PM Theresa May wants to get cracking with extricating Britain from the EU. Pronto! In Italian that means “ready” and is used as a greeting when answering the phone, like we say howzit or sharp, or heita amongst many others, I know. Pronto in Spanish is translated to soon in English. This is the pronto that Theresa May is after. Someone tweeted over the weekend that after her prepared notes that she delivered, she promptly left as if she had some serious business to do. Which she does. Giving a date and drawing a line in the sand means you will get it done.

The FT (subscription only) reckons that she is walking into a trap – The UK prime minister announces she will trigger an exit from the EU before getting any guarantees. As the article suggests, time is against her. If they bumble through this and don’t commit, they face an all out revolt, her in particular. What the long term implications are for the capital of finance in Europe, I am not too sure. The parting line is a little naughty, I thought ” … she has also significantly increased the chances that Brexit will cause severe damage to the British economy.” I thought the people wanted to go it alone? Isn’t she doing what people want? Herewith a five year graph of the performance of the Pound relative to the US Dollar, thanks Bloomberg:

Eish, so now what? The reality is starting to sink in. Some of the attraction of being dual listed there and here are not exactly the same as they were a while back. Check out this ZAR to the GBP groom over five years, the current levels that we are at now were last breached at the beginning of 2014. All things being equal, the dual listed stocks in London have performed only as well as they have, i.e. the currency impact has been neutralised. YTD the Pound is 23 percent weaker to the ZAR. True story.

So which stocks here are dual listed in London? Stocks that have primary listings in the UK and a secondary listing here. And then also, which companies do a fair amount of business in the UK. For the purposes of this exercise, let us look at the majors only, the stocks inside of the ALSI 40. They are British American Tobacco, Glencore, BHP Billiton, Anglo American, Old Mutual, South32, Mediclinic, Mondi Plc, Hammerson (new secondary listing), Intu plc and Investec plc. Brait are planning a listing there at some stage, they are looking at March next year. Steinhoff has a business in the UK. Remgro have a big stake in Mediclinic who are listed there. Bidcorp have a business in the UK. Discovery has a business in the UK. Reinet have a big stake in BATS. Add those all up and you get to nearly 30 percent. We have a real exposure to the woes of the Great British Pound.

Stocks in Jozi closed much lower, down just over half a percent on the day. Off the best levels sadly, the stronger Rand dragged us lower. Industrials sank nearly a percent, banks were flat, financials sank around four-tenths of a percent. Resources sank one-quarter of a percent. Hey! Joburg turns 130 years old today. True story. Access to capital for mining was needed immediately and luckily the first hardy and tough prospectors needed the vehicle. So whilst Joburg has turned 130 today, the JSE itself traces its roots back to November 1887. There were of course people who lived here before, no formal dwellings were established. The surrounds are not exactly favourable for human habitation for agrarian purposes. i.e. farming commercially and subsistence farming. There is no water source nearby. What is more important is that 14 months after Jozi was “founded” capital markets started here. The oldest listed company here in Jozi? DRD Gold, which was incorporated into the JSE in Feb 1895. Happy birthday Joburg!

Over the seas and far away, stocks in New York, New York ended the session lower, off the worst levels though. The Dow ended off three-tenths of a percent, the S&P 500 closed off one-third of a percent and the nerds of NASDAQ lost just over one-fifth of a percent. Energy stocks were flat on the session, utilities were much lower on the session, nearly down one percent. Twitter caught a bid again, up 4 percent on the day. The stock is now up 50 percent in 6 months. Yes. Year to date the stock is up 3.7 percent. Over the last 12 months the stock is down nearly 9 percent. Since listing the stock is down 42 percent, that is November 15 2013. Disney is now rumoured to be looking at Netflix. That makes a little more sense than Twitter. Netflix was up over four percent on the day. Tesla also caught a bid, their sales numbers looked far better than Mr. Market thought. Musk will deliver, he has that feel and smell about him.


 

Linkfest, lap it up

You must have heard this by now – Facebook launches Marketplace, a friendlier Craigslist. Who loses? Would you be more likely to buy used goods from people you know, or do you prefer not to buy from people you know?

Due to Amazons fast shipping times and large range of products, people like to shop on the site. The more times that Amazon offers a superior service, the more likely a customer is to return to the site until online shopping and amazon.com are synonyms with each other – More Than 50% of Shoppers Turn First to Amazon in Product Search

This comes back to the whole debate of net neutrality of the internet. I think this is a great idea from T Mobile. Have free internet but pay if you want an improved speed or video quality, this sounds like a great way of levelling the playing field for people to have access to the unlimited knowledge of the internet – T-Mobile’s plan to charge users for higher quality video seems to be working

Having spent a large chunk of my day yesterday traveling, the thought of self driving cars is becoming more and more attractive. Two reasons, the first is from a safely perspective. Self driving cars won’t overtake on a blind rise and a second is convenience, sleeping instead of driving sounds great – The road ahead


 

Home again, home again, jiggety-jog. The FTSE has hit 7000 points for the first time in 16 months. Stocks locally have caught a bid here, which is a bit of a relief, going has been tough!


 

Sent to you by Sasha, Byron and Michael on behalf of team Vestact.

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