Sasfin : Taking Stock - Microsoft to buy Activision.

MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange fell on Tuesday with the benchmark All-Share index ended down 0.84% to 74,956 points and the blue-chip Top 40 index closed down 0.88% to 68,282 points. The fall, albeit broad-based, was largely driven by a fall in index heavyweight tech major Naspers which registered a fall of close to 3.5% on a massive global tech share sell-off on the back of rising treasury yield. However, petrochemical company Sasol bucked the trend by rising over 6.5% on the back of crude oil prices that hit seven-year highs.

EUROPEAN MARKET COMMENTARY

European stocks closed lower on Tuesday, as investors reacted to developments in the oil and bond markets. The pan-European Stoxx 600 ended the day down 1%, with tech stocks dropping 2.2% to lead the losses as most sectors and major bourses slipped into negative territory. Oil and gas shares were the standout gainers, rising 1.1% on the back of a surge in oil prices amid rising tensions in the Middle East. At the top of the European blue-chip index, French video game publisher Ubisoft climbed 11.9% after news that Microsoft has agreed to acquire Activision Blizzard for nearly $69 billion.

US MARKET COMMENTARY

The major US averages fell sharply Tuesday as government bond yields hit Covid-era highs and after Goldman Sachs reported disappointing earnings. Goldman's operating expenses surged 23% on increased pay for Wall Street employees. Rates rose along the yield curve, with the benchmark 10-year note topping 1.87%, its highest since January 2020. The 10-year yield started 2022 around 1.5%. Technology stocks declined on Tuesday, continuing their downward trend in 2022 as interest rates rise.

ASIAN MARKET COMMENTARY

Asia-Pacific markets traded mixed this morning following an overnight sell-off on Wall Street. In Australia, the ASX 200 dropped 0.48% as most sectors traded lower. The heavily weighted financials subindex declined 0.7% as the country's major bank names sold off. Shares of Japanese conglomerate Sony tumbled 9.1% after Microsoft on Tuesday said it is buying video game publisher Activision Blizzard.

CURRENCY MARKET COMMENTARY

The rand slipped on Tuesday as rising U.S. Treasury yields lifted the dollar. At the close of the session, the rand was trading around R15.52 to the dollar or 0.85% softer. Data on Tuesday showed November mining output rose 5.2% year on year, better than forecasts for 4.25% growth. Later today, the statistics agency will release December consumer inflation figures and November retail sales numbers.

COMMODITIES MARKET COMMENTARY

Gold prices were flat earlier today, steadying near a one-week low hit in the previous session, as the U.S. Treasury yields strengthened to two-year highs on expectations of quicker interest rate hikes by the Federal Reserve. Meanwhile, oil prices rose for a fourth day to a seven-year high as an outage on a pipeline from Iraq to Turkey increased concerns about an already tight supply outlook amid worrisome geopolitical troubles in Russia and the United Arab Emirates.

LOCAL COMPANIES

Vodacom (VOD) -0.4%

Vodacom Group is one step closer to acquiring a 55% stake in Vodafone Egypt from its UK parent Vodafone, following a general meeting held on Tuesday in which its minority shareholders voted in favour of the move. The Johannesburg-based company, one of South Africa's leading cellular networks, is set to acquire the majority stake of the Egypt business for R41 billion. "This is an exciting and important milestone for Vodacom as the acquisition of Vodafone Egypt will be transformational in our evolution from a telco to a techco," Vodacom's CEO Shameel Joosub said in a statement. "This is a transaction that presents significant diversification and growth opportunities for our shareholders," Joosub added. The success of this deal not only promises to shift the company into tech company territory, it also presents it with growth opportunities beyond its key markets, giving it an extra edge over telco MTN.

Tongaat Hulett (TON) -3.5%

Embattled JSE-listed sugar producer and property owner Tongaat Hulett on Tuesday secured enough shareholder support for a controversial multi-billion-rand capital raise or rights offer, which will involve Zimbabwe's billionaire Rudland family. This came despite calls by some shareholder activists, such as David Woollam and Chris Logan, to get the vote postponed by arguing that shareholders did not have sufficient information on the offer and on Mauritian-based Magister Investments Limited, which is a privately-held group controlled by the Rudlands. While the final details of the capital raise (such as share price) are yet to be finalised, one of the resolutions shareholders also had to vote on was related to appointing Hamish Rudland as a new director on the Tongaat Hulett board as part of the proposed deal. Tongaat Hulett is eyeing a capital raise of between R2 billion and R4 billion.

INTERNATIONAL COMPANIES

Microsoft (MSFT) -2.4%

Microsoft announced Tuesday it will buy video game giant Activision Blizzard in a $68.7 billion all-cash deal. The price means Microsoft will pay $95 per share for Activision. Activision's stock ended the day up more than 25%, closing at $82.31 per share on Tuesday. Microsoft's shares closed down more than 2%. This would be Microsoft's largest acquisition to date, followed by its purchase of LinkedIn in 2016 for $26.2 billion. Activision, which is known for popular games such as Call of Duty and Tony Hawk's Pro Skater, has been mired in controversy for the last several months after reports of sexual misconduct and harassment among the company's executives. On Monday, Activision said it fired dozens of executives following an investigation.

Goldman Sachs (GS) -7.0%

Goldman Sachs on Tuesday posted fourth-quarter profit below analysts' expectations as the bank's operating expenses surged 23% on higher pay for Wall Street workers and increased litigation reserves. The bank said quarterly profit fell 13% from a year earlier to $3.94 billion, or $10.81 a share, below the $11.76 estimate of analysts surveyed by Refinitiv. Shares of the bank dropped 7% after falling more than 8% earlier in the session. Still, companywide revenue in the quarter jumped 8% from a year earlier to $12.64 billion, more than $500 million above the consensus estimate, on gains in investment banking and wealth management.

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