David Shapiro: Johannesburg Stock Exchange Report

MONEYWEB, BY ALEC HOGG, 9 JULY 2003

BROADCAST TRANSCRIPT

Let’s have a discussion with David Shapiro on the market today. Mr Shapiro, tell us about the market today. What went on with the Bidvest share price?

DAVID SHAPIRO: That’s totally unfair, because if we look last night

What do you mean? What is totally unfair?

In the last few minutes of trade last night, in the auction, there was a shortage of shares and the share price went up about 6% – we’re talking Bidvest now. So on a very small volume we had this aberration of a kick in the Bidvest share price. Today it undid itself, so I think that the 6% that we saw rise yesterday was undone today and I think the shares overall are net gainers, but I think everybody called this wrong. It wasn’t that the share price came down on this announcement, not at all.

So it wasn’t that I was absolutely brilliant to go long on the shares and I was celebrating last night?

I was trying to get a message to you last night and say sell, sell, sell, but you wouldn’t have been able to, because I think at the opening auction this morning

Where did the shares close?

They closed down about 4%. I’ve got the price here. It was down at the R43 level, just over R43.

Well I’ll tell you just how clever I am – well, rather not me but Arthur Buchner, how clever he is. He sent me an e-mail a little while ago.

He said at the opening we sold our long position on Bidvest at R45.35, so the Aids orphans are feeling a little bit better, and well done to Arthur Buchner on that one. David, the reaction of the market, though, to the deal? Then you aren’t saying we must not interpret that it’s a negative reaction?

Not at all. I think people have got to understand the deal.

It’s not a very easy deal. I think once again Brian is ahead of the pack. I think what’s coming out and what’s nice about this deal is that companies are now taking it upon themselves. They’re not waiting for charters, and once we get this out the way, once we get empowerment out the way, I think overseas investors and even local investors will now say we no longer have this impingement any more, we can now go ahead and look at companies without knowing that they have to enter into these transactions. It’s almost: let’s get it out the way and get back to business as normal.

Well it’s certainly innovative and Brian Joffe will be taking us through that in some detail in just a little while. The rest of the market today wasn’t particularly inspiring?

Not at all. There was no news, no economic or corporate news out, profit-taking, rand very volatile. It’s dictating the pace. We saw the rand at R7.73/$ at one stage, down to R7.54 at another stage, closing at R7.60 – so as long as you’ve got those kind of movements in the market you’re going to have huge volatility, and that puts people off. You never know where to pitch your prices, because of the huge impact that it does have on bids and offers.

That’s day-to-day stuff. If you have a look at it from a longer-term perspective, you’ve still got to believe that this market is good value.

I’m getting more and more bullish, because the longer that markets hold at these levels, even if they move sideways, it’s going to give support to buyers to come in. You’re still seeing bond rates rise. In other words interest rates on foreign markets at the long end of the market are going up, and that money continues to flow into equities. And another activity that’s taking place now – we’re seeing more and more merger and acquisition activity, in other words consolidation. The more consolidation you see, the more of that excess capacity that we talk about is being absorbed, and that’s a good sign for this market.

Anything more on the Pechiney/Alcan transaction or proposed hostile takeover?

Well, as we would expect, Pechiney come out and say that it’s too cheap. I think it will come in play. I don’t know if Anglo have said anything, or Billiton, but I don’t think the story’s over yet. But there again I think the market would like the deal to go through, to see more consolidation, take off a little more excess off the market and allow the aluminium price to perhaps steady. And you got it spot on right – you’ve got China coming in as a big producer, and I think the west needs to counter-balance that. Or let’s put it this way, the more expensive producers need to consolidate and bring their cost of production down.

I thought what Timothy had to say on the night that it all broke was really astute, in that he got hold of the Alcan people and they explained about the superior technology. And then we had Mahomed Seedat last night again explaining about that superior technology – almost 40% more efficient, the plant, that they have proposed for Pechiney.

And then you’ve got Eskom coming in here. That’s where it’s so good that this plant will be produced in Coega, if it is coming, because Eskom have come to the party and will do a deal that you will get cheap electricity or excess-capacity electricity to keep the production down. If the price goes up, yes, the electricity price will go up as well.

As far as the market is concerned today, David, don’t panic, don’t slit your wrists?

Not at all, not at all, just watch the foreign markets, watch the foreign markets. They’re steady, the Nasdaq is consolidating. Yes, you’re going to have days of a bit of profit-taking, but we haven’t seen that collapse that everybody’s been forecasting – you know that plunge back into the bear.

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