Sasfin : Taking Stock - Absa expects annual profit to more than double

MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Local stocks traded lower on Friday as the JSE All Share index recorded a 0.3% decline to 70,808 index points, while the blue-chip Top 40 index closed 0.39% lower. Resources were the biggest drag, with the local J210 index shedding 1.56%. On the data front, South Africa's private sector business activity recovered in November after staff in its biggest metal-workers union returned to work after striking in October, a survey showed on Friday. IHS Markit's Purchasing Manager's Index (PMI) jumped to a six-month high of 51.7 in November from 48.6 a month before, skipping back into expansionary territory after a month.

EUROPEAN MARKET COMMENTARY

European markets closed lower after another volatile session on Friday, wrapping up a tumultuous week following the discovery of the new omicron Covid-19 variant. The pan-European Stoxx 600 provisionally closed down about 0.8%, having fluctuated either side of the flatline earlier in the day. For the week, the benchmark is down more than 1%. Mining stocks led the losses on Friday, slumping 2.8%, as almost all sectors and major bourses dipped into negative territory.

US MARKET COMMENTARY

US stocks dropped on Friday, after a disappointing November jobs report, as the market wrapped up a roller-coaster week driven by Covid omicron variant concerns. Technology stocks were among the most notable losers on Friday as Tesla fell 6.4% and Zoom Video declined nearly 4.1%. DocuSign cratered 42.2% after the company issued fourth-quarter sales guidance that was lower than what analysts expected. Meanwhile, November's jobs report showed slower-than-expected job creation last month. Nonfarm payrolls increased by just 210,000 for the month, well below the 573,000 jobs predicted by economists polled by Dow Jones.

ASIAN MARKET COMMENTARY

Stocks in Asia-Pacific dropped earlier today, while investors monitored bitcoin prices after they fell sharply over the weekend. Alibaba shares in Hong Kong fell nearly 8% in early trade. Four new stocks - including Chinese technology giants JD and Netease - were added to the benchmark Hang Seng index. The latest update increases the number of stocks in the main index to 64, from the current 60 stocks. Troubled Chinese property developer Evergrande will be removed from the China Enterprises index.

CURRENCY MARKET COMMENTARY

The rand steadied in early trade on Friday, struggling for momentum as some uncertainty over the Omicron coronavirus variant lingered. However, the rand was 0.93% softer against the dollar at the close of the session as it traded around the R16.09 mark. The continued spread of the Omicron variant globally has in recent days buoyed havens like the dollar and pressured riskier currencies. In other news, Bitcoin prices dropped nearly 10% last week and is 13.86% lower for the month so far.

COMMODITIES MARKET COMMENTARY

Oil prices rose by more than $1 a barrel this morning after top exporter Saudi Arabia raised prices for its crude sold to Asia and the United States, and as indirect U.S.-Iran talks on reviving a nuclear deal appeared to hit an impasse. The price hikes were implemented despite a decision last week by the Organization of the Petroleum Exporting Countries and their allies including Russia, a group known as OPEC+, to continue increasing supplies by 400,000 barrels per day in January.

LOCAL COMPANIES

Absa Group (ABG) +4.2%

Absa expects annual profit to more than double in the year to December 31, it said on Friday, citing cost controls and lower bad debts. In 2020 the bank reported headline earnings per share, the main profit measure in South Africa, of 730.9 cents. It said it will give the expected range for 2021 soon. One of South Africa's top four banks, Absa is bouncing back from hefty provisions taken last year due to the pandemic.

MTN Group (MTN) +0.5%

MTN Group said the initial public offering of its Ugandan unit raised 535.94 billion shillings (R2.4 billion), less than two-thirds of its target. At least 2.9 billion shares were allotted out of the 4.5 billion shares that were offered, Kampala-based MTN Uganda said in a statement, without providing reasons for the undersubscription. The stake which Africa's largest wireless carrier has in the unit was cut to 83.05% from 96% following the allotment. It will list on the Uganda Securities Exchange on Monday. The South African-based group had offered to cut its stake by 20% in line with regulatory requirements. Uganda and Kenya's national social security funds, Duet Africa Opportunities Master Fund IC, EFG Hermes Oman, First Rand Bank and local pension funds for the Ugandan central bank and tax authority were among the top buyers of stakes in MTN Uganda, according to the statement. The IPO, the first in the country in more than three years, is also the biggest since Umeme raised about $66 million in 2012, according to data compiled by Bloomberg.

Africrypt

Barely a week after a mystery 'white knight' offered creditors $4 million (R64 million) to bail out investors in the failed Africrypt scheme, another mystery investor has appeared with a better offer of $5 million (R80 million), equivalent to 65 cents in the rand. The first offer made in November was also for $5 million, though only $4 million of that would go to creditors, with the remaining $1 million (R16.13 million) going to the running of the company.

INTERNATIONAL COMPANIES

Trump Media & Technology Group

Donald Trump's new social media firm says it has entered into agreements to raise $1bn (£755m) from investors ahead of a planned stock market listing. The Trump Media & Technology Group is working to launch a social media app called Truth Social early next year. It comes as Mr Trump remains banned from Twitter and Facebook following the attack on the US Capitol in January. "$1bn sends an important message to Big Tech that censorship and political discrimination must end," he said. "As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech." Mr Trump announced plans to launch Truth Social earlier this year, saying it would allow conversation "without discrimination on the basis of political ideology".

Boots

The parent company of Boots, Britain's biggest high street chemist, is to explore a sale of the business next year that could value it at well over £5bn. Walgreens Boots Alliance (WBA) is lining up Goldman Sachs, the Wall Street bank, to advise it on a review of options that could result in new owners for the 172-year-old health and beauty retailer. City sources said on Friday evening that the process would be exploratory and might not ultimately lead to WBA disposing of Boots. Spinning the chain off into a separately listed company could also be a possibility, they added. A full-blown auction of Boots would be among the most significant deals involving a high street chain for many years, and will draw close scrutiny in Whitehall given Boots' critical nationwide role in delivering public healthcare services

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