🇿🇦 Local Market Indicators & News Highlights
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🌟SA Trade Surplus Rises to R24.3 Billion in June
‍South Africa's trade surplus widened to R24.3 billion in June, the highest since September 2022. This increase comes despite a 3.4% drop in exports and a 6.6% decline in imports. Export contractions were led by machinery, food items, and precious metals, though vehicle exports saw a 5% rise. Imports fell sharply in machinery, electronics, and chemicals, reflecting the impact of higher interest rates and weak domestic confidence. However, imports of precious metals rose by 50%.
Year-over-year, exports grew by 3.4%, while imports dropped by 13.6%. Despite the challenging global and domestic environment, South Africa's trade performance remains resilient, with exports outpacing imports. This trend is expected to continue throughout the year, supported by improving local conditions and stronger global demand. Meanwhile, imports are likely to remain subdued due to weak domestic demand and investment.
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🌟SAB Thrives as Competitors Struggle‍
South African Breweries (SAB) is enjoying record-high beer sales and strong profit growth, according to the second-quarter results of its parent company, AB InBev. Despite a global decline in beer volumes, SAB's revenue surged by double digits, driven by its popular brands like Carling Black Label and Castle.
The 2016 AB InBev-SABMiller merger allowed SAB to penetrate the premium beer market, boosting sales of global brands like Stella Artois and Corona in South Africa. This strategic move has led to increased margins and a significant gain in market share.
In contrast, Heineken's South African unit, which merged with Distell last year, has struggled. The premium pricing of its core beer brands—Heineken, Heineken Silver, and Amstel—has hindered its ability to compete with SAB's more established offerings. This poor performance resulted in a R10 billion write-down and a R386 million loss for Remgro, a key stakeholder.
SAB's local operations continue to thrive, with major investments in breweries and job creation, supporting over 140,000 jobs across the value chain. Meanwhile, Heineken faces challenges in regaining its foothold in the competitive South African market.
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🌟 Stanlib Infrastructure Fund II Expands Solar Investments with R921 Million Deal
Stanlib Infrastructure Fund II is expanding its renewable energy portfolio with a R921 million investment in three solar power plants: Kalkbult, Linde, and Dreunberg. The fund has acquired a minority interest in these plants, which have a combined capacity of 190MW and are located in South Africa's Northern and Eastern Cape regions.
These solar plants were part of the first and second rounds of South Africa’s Renewable Energy Independent Power Producer Programme (REIPPP) and have 20-year power purchase agreements with Eskom.
Stanlib’s investment, set to close in two phases by mid-2025, is aligned with its strategy to boost exposure to quality renewable energy assets. Scatec ASA, a Norwegian renewable energy company, will continue to provide operations, maintenance, and asset management support for the plants.
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🌟Capitec Receives Green Light for Major Insurance Acquisition‍
Capitec has secured approval from the Competition Commission to acquire Guardrisk Life’s credit life insurance business, a significant move in the bank's expansion into the life insurance sector. This acquisition aligns with Capitec's broader strategy, following its recent launch of a new life cover product and a 12% increase in profit after tax for its insurance division in the 2024 financial year.
The bank, which obtained its own long-term insurance license in 2023, had previously underwritten its credit life insurance policies through Guardrisk. The transfer of these policies to Capitec Life is expected to be finalized by August 2024, adding to the 558,417 active policies already issued under its own license.
The Competition Commission’s approval comes with the condition that Capitec provides funding to firms owned by historically disadvantaged people, ensuring the acquisition does not reduce competition in the market.
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‍🌍 Global Market Indicators & News Highlights
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🇺🇸 United States: Stocks Decline Amid Cooling Labor Market
Stocks Fall Sharply: Major U.S. benchmarks closed lower, with the Nasdaq entering a technical correction, driven by disappointing earnings reports and weak economic data.
Labor Market Slows: The U.S. economy added only 114,000 jobs in July, the lowest in three months, while the unemployment rate rose to 4.3%, its highest since October 2021.
Yields Drop on Rate Cut Expectations: The yield on the 10-year Treasury note fell to its lowest level since December as expectations for a Fed rate cut in September jumped to 73.5%.
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🇪🇺 Europe: Markets Tumble on U.S. Data Concerns
European Stocks Drop: The STOXX Europe 600 Index fell 3.08%, with major indexes like Germany’s DAX and Italy’s FTSE MIB seeing significant declines, driven by weak U.S. economic data.
Eurozone Inflation Rises: Eurozone inflation increased to 2.6% in July, while services inflation eased for the first time in three months. Consumer prices varied across the region, with inflation rising in Germany, France, and Italy.
Economic Growth and Unemployment: The Eurozone economy grew by 0.3% in Q2, led by France, Italy, and Spain, though Germany’s economy contracted. The unemployment rate slightly increased to 6.5% in June.
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🇬🇧United Kingdom: Rate Cut and Market Volatility
Stocks Slump: The FTSE 100 and FTSE 250 indexes declined 1.34% and 3.0%, respectively, with losses driven by global risk-off sentiment following weak U.S. labor data.
BoE Cuts Interest Rates: The Bank of England cut rates to 5.00%, but markets remain divided on the likelihood of further cuts, with a cautious approach signaled by the central bank.
Investor Sentiment Improves: Despite recent market volatility, some investors see opportunities in undervalued UK assets, with expectations of improved economic stability.
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🇯🇵 Japan: Sharp Stock Losses and Yen Strength
Market Declines: The Nikkei 225 fell 5.2% and the TOPIX Index dropped 6.0%, with the Nikkei experiencing one of its largest single-day losses since the pandemic.
Yen Strengthens: The yen appreciated to around JPY 148.9 against the USD, impacting export-driven companies. The 10-year JGB yield also fell to 0.98%.
BoJ Tightens Policy: The Bank of Japan raised its key interest rate to 0.25% and detailed plans to taper bond purchases, while lowering its inflation and growth outlooks.
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🇨🇳 China: Mixed Markets and Manufacturing Weakness
Equities Mixed: The Shanghai Composite Index gained 0.5%, while the CSI 300 lost 0.73%. The Hang Seng Index in Hong Kong declined 0.68%, influenced by weak manufacturing data.
Manufacturing Contraction: The official manufacturing PMI fell to 49.4 in July, marking the third consecutive month of contraction, with the non-manufacturing PMI also showing slight declines.
Industrial Profits Rise: Industrial profits increased by 3.6% in June, driven by stronger production and slower price declines, though domestic demand remains weak.