🇿🇦 Local Market Indicators & News Highlights
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🌟 Surge in Foreign Investment Boosts South African Markets
Foreign investment is flowing into South Africa following the formation of a Government of National Unity (GNU) that includes the business-friendly Democratic Alliance (DA). The ANC lost its majority for the first time since 1994 in the May elections, leading to positive reactions from investors. Cyril Ramaphosa's second term as president and a market-friendly cabinet have fueled optimism, resulting in the rand dipping below R18/$ and the JSE All Share Index reaching record highs.
JSE data shows foreign investors have injected R9.1 billion into South African stocks in the past two weeks, reversing a seven-quarter trend of net outflows. The reappointment of Enoch Godongwana as finance minister, credited with achieving South Africa’s first primary budget surplus in 15 years, has been particularly well-received. Over 100 days without load-shedding have also bolstered economic confidence, with predictions of over 2% GDP growth annually if the trend continues.
🌟 Bidvest to Sell Banking and Financial Migration Businesses
Bidvest announced plans to sell Bidvest Bank and FinGlobal as part of a strategic restructuring of its financial services division. This move follows the earlier decision to dispose of Bidvest Life. The sale, expected to conclude by the end of 2024, aims to focus on diversifying into allied automotive services. The financial services currently offered by Bidvest Bank and FinGlobal, including corporate banking and financial migration services, will be transferred to the group's automotive division. The restructuring aligns with Bidvest's strategy to recycle capital for growth. The disposal requires regulatory approvals and is expected to identify a suitable buyer by year-end. Bidvest Bank recorded a trading profit of R234 million in 2023.
🌟 South Africa's R169 Billion Energy Plan
South Africa's new Environment Minister, Dion George, focuses on utilizing $9.3 billion (R169 billion) from the Just Energy Transition Partnership (JETP) to boost renewable energy development. George, appointed under the new coalition government, aims to connect more renewable energy plants to the national grid. Despite securing the JETP deal in 2021, South Africa has yet to close any coal-fired plants and has only added 150 megawatts of renewable energy. The delay in implementing projects has frustrated international partners like the US, UK, and Germany. George plans to accelerate renewable energy construction while ensuring adequate power supply before closing coal plants. Recent tenders for renewable energy failed due to uneconomic bids and lack of transmission capacity. Despite these challenges, Eskom has marked 100 days without load-shedding, reflecting improved power generation.
🌟 Clicks to Sell Unicorn Pharmaceuticals After ConCourt Ruling
Clicks announced it will sell its stake in Unicorn Pharmaceuticals following a Constitutional Court ruling prohibiting it from owning pharmacies and manufacturing its own medicines. This decision follows an eight-year legal challenge by the Independent Community Pharmacy Association (ICPA), which argued that Clicks' dual role gave it an unfair advantage.
The sale of Unicorn Pharmaceuticals is expected to be finalized by the end of July, allowing Clicks to comply with the court's ruling and the Department of Health to resume processing pharmacy license applications. This move is seen as a resolution to a protracted legal battle, paving the way for Clicks to continue its retail operations without conflict. Clicks' share price rose 2.3% following the announcement.
🌍 Global Market Indicators & News Highlights
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🇺🇸 United States: Market Moves and Economic Data
Narrow Market Gains: The S&P 500 continued to hit record highs, but the market's advance was narrow, primarily driven by growth stocks outperforming value stocks significantly.
Services Sector Slump: There was a significant downturn in the services sector, with ISM's services index dropping into contraction territory, indicating potential economic cooling.
Mixed Labor Market Signals: Although the official jobs report was slightly better than expected, broader labor market data indicated a cooling trend, with some sectors showing job losses and overall hiring and quits returning to pre-pandemic levels.
🇪🇺Europe: Political Shifts and Economic Cautions
Mixed Stock Performances Amid Political Shifts: The STOXX Europe 600 Index rose, reflecting eased political jitters as election outcomes in France and the UK led to significant political shifts.
Central Bank Cautiousness: ECB President Christine Lagarde signaled a cautious approach to future rate cuts, citing ongoing inflation uncertainties and the potential for new economic shocks.
Economic Indicators Showing Weakness: Germany's manufacturing orders and industrial output declined, indicating continued economic struggles within the eurozone.
🇬🇧United Kingdom: Political Change and Economic Outlook
Labour Party's Election Victory: The Labour Party secured a decisive win in the general election, promising extensive political and economic reforms under new leadership.
Economic Data and Market Reaction: Post-election, the UK's economic growth figures were stronger than expected, which influenced government bond yields and led to a slight uptick in the FTSE 100 Index.
Focus on Long-term Reforms: The new Prime Minister, Keir Starmer, emphasized rebuilding trust in politics and taking a measured approach to implement changes.
🇯🇵 Japan: Economic Data and Policy Anticipation
Stock Market Gains: Japanese stock markets showed robust performance, supported by a weak yen, which benefits export-heavy industries.
Government Bond Yields and Monetary Policy: The yield on 10-year government bonds reached a decade high, reflecting market anticipation of tighter monetary policy by the Bank of Japan.
Inflation and Consumer Spending: Consumer price inflation was higher than expected, but household spending decreased, indicating potential challenges in domestic economic recovery.
🇨🇳 China: Slowing Economy and Sectoral Challenges
Economic Slowdown Concerns: Shanghai Composite Index and the blue chip CSI 300 slightly declined amid ongoing concerns about the slowing economy and underwhelming manufacturing data.
Manufacturing Sector Struggles: Both official and private PMI readings showed contraction or minimal growth, highlighting the challenges faced by the manufacturing sector.
Property Market and Economic Stimulus: Despite government efforts to stabilize the property market, new home sales continued to decline, stressing the prolonged downturn in this crucial economic sector.