Quick Summary

  1. Absa CEO Daniel Mminele to step down from the role.
  2. Major strikes are planned for South Africa – including one that could cut off the water supply.
  3. Current rand strength surprises on the upside – Anchor Capital.
  4. The current chip shortage will be hard to overcome.
  5. Peloton faces mounting pressure to recall treadmills after one death, dozens of injuries.
  6. S. House of Representatives approves the cannabis banking bill.
  7. Currencies: USD/ZAR-R14.23, EUR/ZAR-R17.14, GBP/ZAR-R19.90

South Africa

  1. Daniel Mminele, the first black executive to lead Absa, is set to step down from his position as CEO less than 16 months into the role due to differences with executives over the strategic direction of the country’s third biggest banking group by assets. According to people familiar with the matter, Mminele and Absa have agreed to part ways due to differences with some members of his executive team over changes to the bank’s strategy, which was largely in place when he joined. Subsequent discussions with the board failed to resolve the issues leading to the eventual decision to part ways, the people said.(Source: businesslive.co.za)
  2. Labour unions have threatened to down tools and embark on mass industrial action as the impasse around government wage negotiations continues. The Daily Maverick reports that government has remained steadfast in its decision to introduce a salary freeze for South Africa’s 1.3 million public servants during the 2021/22 financial year. In response, unions have threatened industrial action that would see key public servants such as doctors and nurses embark on a strike.  “We will shut down public service until the government takes our demands seriously,” said Reuben Maleka, assistant general manager of the Public Servants Association (PSA), which represents state workers including teachers, attorneys, police officers and others.  “Public servants can no longer pay the price for the country’s economic woes fuelled by rampant fraud, corruption, and mismanagement,” said Maleka.  Finance minister Tito Mboweni’s budget published in February assume an effective nominal public sector wage freeze over the next three years.(Source: businesslive.co.za)
  3. The theme of global financial markets during 1Q21 was that inflation was recovering (and possibly overheating), which resulted in global bond yields (predominantly those in the US) surging higher and the US dollar recovering from some previous weakness. However, 2Q21 has now rolled in and market themes have also shifted. Analysts and market commentators are barely talking about inflation and, instead, discussions are around the lower volatility ahead, a reopening of economies, and future US corporate tax hikes. The current global theme of lower volatility is great news for carry traders who will feel emboldened to increase their exposure to the currencies of those countries where interest rates are above zero. The rand has long been one of their favourite investment destinations. At the same time, the consensus view on the reopening of economies is that the commodity rally still has legs and therefore investments in South Africa, Russia, and Brazil will remain attractive. Combining these two themes means that the rand will see some offshore support for a while. The foreign buying of local bonds has also turned positive once again and the currency has strengthened significantly over the past two days (14-16 April)….

Click here to read the full article.

Global

  1. The world’s leading suppliers of semiconductors are pushing to overcome the prolonged chip shortage that has hampered production of everything from home appliances to PCs to autos. Chip makers are trying to eke out more supply through changes to manufacturing processes and by opening up spare capacity to rivals, auditing customer orders to prevent hoarding and swapping over production lines. The bad news is, there are no quick fixes, and shortages will likely continue into next year, according to the industry’s executives.  On top of a spike in demand, producers have been hamstrung by a series of freak events that have knocked out supply, while ongoing U.S.-China political frictions and concerns of a prolonged shortage have prompted some manufacturers to stockpile chips.  The current shortfall includes the less-advanced chips that the industry’s biggest players have been pulling away from to pursue higher-margin, cutting-edge chips. Building new production capacity usually takes years.  That could slow down the post-pandemic recovery for certain industries that use the chips that are looking to take advantage of rising consumer spending. It also feeds into inflation concerns as higher chip costs can stoke prices throughout the economy.  (Source: wsj.com)
  2. Pressure mounted on Peloton Interactive Inc. on Monday when the chair of a House consumer-protection subcommittee called on the company to recall its treadmills. The move comes days after a federal safety agency told people with young children or pets to stop using the treadmills and urged a recall of the product, which it says is responsible for dozens of injuries and at least one death.  Peloton has called the advisory by the Consumer Product Safety Commission “inaccurate and misleading.” On Sunday, Peloton CEO John Foley said in a letter to customers that it has “no intention” of stopping sales or recalling the machines.  The company had no immediate response to Monday’s statement by U.S. Rep. Jan Schakowsky (D., Ill.), who chairs the Consumer Protection and Commerce Subcommittee.  “The videos and reports of children being sucked under Peloton treadmills are harrowing, and they graphically illustrate the grave and immediate risks these products pose to users and their families,” Ms. Schakowsky said. (Source:wsj.com)
  3. The U.S. House of Representatives on Monday passed legislation that would allow banks to provide services to cannabis companies in states where it is legal, a step towards removing what analysts say is a barrier to development of a national industry. Lawmakers voted 321-101 to approve the bill and send it to the Senate.  The bill clarifies that proceeds from legitimate cannabis businesses would not be considered illegal and directs federal regulators to craft rules for how they would supervise such banking activity.  Banks have generally been unwilling to do business with companies that sell marijuana or related products, fearing they could run afoul of federal laws.  That has left companies in the marijuana industry with few options, including relying on just a handful of small financial institutions or doing business in cash.  The American Bankers Association has lobbied aggressively for the “SAFE Banking Act” bill.  “Banks find themselves in a difficult situation due to the conflict between state and federal law, with local communities encouraging them to bank cannabis businesses and federal law prohibiting it,” the group wrote in a letter to lawmakers on Monday. “Congress must act to resolve this conflict.”(investing.com)

Chart of the week

the recovery of beach stocks (Source: visualcapitalist.com)

Weekly COVID-19 Update:

Global

Pfizer said it has begun human safety testing of a new pill to treat the coronavirus that could be used at the first sign of illness. The drug binds to an enzyme called a protease to keep the virus from replicating. Protease-inhibiting medicines have been successful in treating other types of viruses, include HIV and Hepatitis C

South Africa

Further easing in daily new infections that could allow even further easing of restriction. News around J&J vaccine promising.

link to the COVID-19 Map to keep track of the Coronavirus.

https://coronavirus.jhu.edu/map.html

 

Disclaimer: The material contained in this document is provided for general information purposes only. While every care and effort has been taken to ensure the accuracy of the information provided, Helfin Financial Services Group makes no representation and gives no warranty, whether express or implied, relating to the correctness of the information in this document. Helfin Financial Services Group accepts no responsibility for, and the user indemnifies Helfin Financial Services Group harmless from any loss, liability, damage or expense of whatsoever nature (including but not limited to direct, indirect and consequential loss), arising from reliance on information contained in these pages, or otherwise connected with the information in these pages [whether arising from breach of contract (fundamental or otherwise), delict, negligence, gross negligence or otherwise]. Except where otherwise stated, the copyright of all this document contents is owned by Helfin Financial Services Group. No part of this documents’ contents may be reproduced or transmitted or reused or be made available in any manner or any media, unless prior written consent has been obtained from Helfin Financial Services Group. In the event of any dispute of whatever nature arising as a result of the use of the information in this document, the user (including users resident outside the Republic of South Africa) accepts that the law of the Republic of South Africa shall apply. 

Past performance is not necessarily a guide to the future and investors may not get back the full amount invested. Asset class information is as at the stated date. However asset allocations could change considerably over time subject to mandate parameters.