Ferrari Revved Up on Earnings, But Stock Slips 7% as China Shipments Stall

LOCAL MARKET COMMENTARY

On Tuesday, the Top 40 Index and the All Share Index rose by 0.57% and 0.49%, closing at 78,498 and 86,643 points, respectively. South Africa's private sector continued its growth path in October, supported by lower business costs and selling prices, as reported by the latest Purchasing Managers' Index (PMI) survey. The S&P Global South Africa PMI came in at 50.6, a slight decrease from September's 51.0 but remaining above the 50.0 threshold that signals expansion. Additionally, South Africa and Britain have agreed to strengthen trade and defence ties, following a meeting between the two countries' foreign ministers on Tuesday.

EUROPEAN MARKET COMMENTARY

European markets were largely steady as trading opened on Tuesday. In the UK, the FTSE 100 dipped slightly, impacted by a decline in AstraZeneca's shares amid investor caution surrounding U.S. Election Day. AstraZeneca saw its shares fall by 8.4%-the largest single-day drop since March 2020-after reports suggested that senior executives from its China unit might be implicated in a significant insurance fraud case, potentially the largest in China's pharma sector in recent years.

US MARKET COMMENTARY

U.S. stocks rose sharply on Tuesday as economic data pointed to a strong economy, with a key services sector index reaching its highest level since August 2022. Investors, however, prepared for potential market swings as the U.S. presidential election remained tightly contested between Republican Donald Trump and Democrat Kamala Harris, with the final outcome potentially taking days to determine. Betting markets, often seen as election indicators, showed improved odds for Trump. Meanwhile, the trade deficit hit a 2.5-year high as businesses increased imports, possibly to avoid future tariffs under a Trump administration.

ASIA MARKET COMMENTARY

Asia-Pacific markets mostly rose this morning as investors reacted to recent economic updates. Minutes from the Bank of Japan's September meeting revealed agreement among members on raising interest rates if economic and price growth aligned with targets. Meanwhile, China's National People's Congress continued its five-day session, with investors watching for announcements on economic stimulus and stability measures. On Tuesday, the head of the People's Bank of China stated that supportive monetary policies would remain in place, according to state media.

CURRENCY MARKET COMMENTARY

South Africa's rand rose slightly on Tuesday, supported by a local purchasing managers' index report, while the U.S. election drew global attention. This morning, the dollar strengthened, and bitcoin surged as investors leaned back into "Trump trades" amid early results from the close presidential race.

COMMODITY MARKET COMMENTARY

Gold prices remained stable this morning as investors awaited results from the closely contested U.S. presidential race. Meanwhile, oil prices dropped as early election results showed a tight race between Democrat Kamala Harris and Republican Donald Trump.

Sibanye Stillwater Limited (SSW) +10.15%

For the quarter ending September 30, 2024, the company achieved a 9% year-on-year increase in adjusted EBITDA, reaching R3.3 billion (US$184 million), alongside enhanced safety measures and a solid balance sheet. Among the key highlights, the South African (SA) gold operations experienced a substantial increase, with adjusted EBITDA rising by 292% to R1.35 billion (US$75 million), primarily driven by favourable gold prices. SA platinum group metal (PGM) operations also saw a 5% production increase, keeping costs stable and contributing R1.6 billion (US$88 million) to adjusted EBITDA. In the U.S., PGM operations are anticipated to benefit from recent tax amendments, expected to add approximately US$140 million in 2023 and US$100 million in 2024. Meanwhile, zinc production at the Century operation grew by 9%, resulting in a notable 966% increase in adjusted EBITDA to US$31 million (R565 million). The company also obtained a €500 million green financing loan to support its Keliber lithium project.

Murray & Roberts Holdings Limited (MUR) -22.17%

Shareholders are advised that earnings per share and headline earnings per share for the six-month period ending December 31, 2024, are anticipated to decrease by at least 20% compared to the same period last year. This expected decline is aligned with the factors discussed in the recent business update. While an exact range is not yet available, shareholders can expect further communication as soon as there is sufficient clarity to provide a more precise update.

Ferrari N.V. (RACE) -7.06%

Ferrari's core earnings grew by 7% in the third quarter, despite a slight drop in car shipments due to a summer switch to a new enterprise resource planning (ERP) system to improve business processes. Shipments fell 2% to 3 383 units, with a notable 29% decline in China, though Ferrari has limited exposure there. Profit growth was driven by demand for high-end models and personalized options. Ferrari reported an adjusted EBITDA of 638 million euros ($696 million), meeting analyst expectations, and maintained its full year forecast of at least 2.5 billion euros. Despite a 35% stock gain this year, shares dropped 6.4% after the announcement.

Nintendo Company Limited (7974) -3.86%

Nintendo cut its operating profit forecast by 10% to 360 billion yen ($2.36 billion) for the year ending March 2025, citing slowing sales of its aging Switch console. The forecast fell below analyst expectations of 391.4 billion yen. In the first half of the financial year, Nintendo sold 4.7 million Switch consoles, a drop from 6.8 million a year prior. The company also reduced its full-year Switch sales forecast by 7% to 12.5 million units-20% lower than last year's 15.7 million units-and lowered its software sales forecast by 3% to 160 million units.

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