I am a keen armchair follower of that massive sporting event, the Tour de France. For us in South Africa this is a race that starts in the winter and ends in the spring. After the cold snap we are enduring this week in Joburg, a spot of warmer sunshine and green shoots on the trees will be very welcome.
I imagine that most of the Tour riders, however, are not welcoming the prospect of soon having to pedal themselves and their bikes up some pretty awesome mountain peaks. Much the same feeling must be creeping over the bulls as they watch the all share index which seems keen just to freewheel down into the valleys, drains and dongas. It is now more than 10% below the March peaks. Regular readers will know that this unfriendly behaviour does not surprise me. In fact I am huffy that it is all happening so slowly and indecisively.
The headline-grabbing financial headline of the week was (as usual) about the rand which was accused of being STRONG. At one point, just half a dozen of them would have scored you a greenback. So far this month, however, the dollar has weakened against most other currencies as much as or even more than it has against our own runt. This means that in July, we have suffered from dollar weakness rather than rand strength. For the exporters, of course this is a nicety that doesn’t help them pay their bills and dividends. This is certainly the reason for most of the downward pressure on the indices.
The Standard Bank preference shares began to trade this week and the efficiency of the market surprised me. Despite the massive unsatisfied demand for the issue, the price in the market almost immediately settled at just about 3.5% above the offer price. This placed the new share on almost exactly the same projected forward dividend yield (7.75%) as the two previous issues (Nedbank & Investec). This is still a very tasty return and equates to something in the region of 12.5% for a taxable interest paying instrument. All tax-paying portfolios need to have slug of these prefs tucked away inside them. Just imagine the fun of filling in next year’s tax return and putting a much smaller figure in the “interest received” block.
So I am afraid there is certainly no call just yet for investors to don the whites, thread a red rag through the belt loops and start prancing about, trying to attract the attention of the bulls. They just aren’t about yet. Pull that kind of stunt and you are much more likely to get a nasty slapping from the shaggy clawed one. Far safer at this stage I think, to leave the action to the guys in slick shorts and slotted helmets. And please keep warm this weekend.
James Greener
9 July 2004
