Naspers, commodities and a ’surplus’ of vaccines brought volatility

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In a week where most commodity prices recovered after a period of uncertainty and volatility – considering renewed Delta variant infections in China, Japan and India – equity and exchange rates followed in a nervous fashion.

The gold price after tumbling by $30 (R441) last Monday to $1 735 per ounce, bounced back strongly during the end of last week to trade Friday at levels $1 772 or $10 higher than the previous Friday. In the same manner the platinum price recovered to $1027 or $52 per ounce higher than a week ago.

The stronger dollar and some negative foreign sentiment on the domestic political turbulence of the former president Jacob Zuma and suspended ANC secretary-general Ace Magashule court cases and President Cyril Ramaphosa’s appearance in front of the Zondo commission, contributed to a weaker rand.

The renewed efforts by the Chinese government to regulate the gaming sector imposed much volatility in gaming company Tencent and, therefore, on Naspers and Prosus share prices, which have a stake in the Chinese firm. Naspers increased by 13.7 percent from August 3 to August 10 just to tumble again by 5.1 percent over the next three days.

The dollar and US equities remain a haven and the continuous better than expected earnings of companies pushed the S&P500 and Dow Jones Industrial indices to new record highs on Friday after strong Disney earnings boosted sentiment. Both these two indices are now 16 percent up for the year to date.

Another contributed factor towards the business and, especially, tourism sector in South Africa is the noticeable shift from a supply shortage of Covid-19 vaccines to a slack demand of people who want to be vaccinated.

Bloomberg reports that Nicholas Crisp, a deputy director-general in the Department of Health, said, “We are sitting in a situation where we don’t have a vaccine constraint, at least for the next two months.”

He remarked, “Now we need vaccine demand.”

The government and private sector jointly are working together to meet the target of vaccinating two-thirds of adults by the end of the year. The opening of the economy especially the crucial tourism sector may suffer from the lack of interest of people to receive the injections.

On the JSE, the recovering of commodity prices and the weaker rand helped most indices to improve last week. The all share index traded up by more than 1 percent and closed Friday on a new record weekly high for 2021 on 69 384 points. The Industrial 25 index gained 2.15 percent and the Resources10 index improved by 0.8 percent. Due to the weaker rand, Financials lost 0.7 percent and listed property traded flat for the week. On the capital markets bonds remained steady.

The R186 short term treasury traded Friday on 7.39 percent, marginally higher than the previous week’s 7.38 percent.

This coming week investors and analysts will concentrate on the release of South Africa’s inflation rate for July on Wednesday. It is expected that the rate increased marginally from 4.9 percent in June to 5.1 percent in July. Statistics South Africa will also publish the latest retail sales data for June on Wednesday, and the mining production numbers also for June on Thursday.

On global markets all attention will be on the announcement of the second quarter 2021 gross domestic product growth rate for Japan today and the EU tomorrow. The UK and EU will release its latest unemployment numbers tomorrow. The US will announce its retail sales data also tomorrow. The UK, EU, and Canada’s inflation rates will be released on Wednesday.

The main event this week will be the publishing and release of the US Federal Reserve’s Federal Open Market Committee’s minutes of their latest meeting on US interest rates on Thursday.

Chris Harmse is an economist at CH Economics.

*The views expressed here are not necessarily those of IOL or of title sites


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