Episode Transcript
The Finance Ghost: Welcome to episode 281 of Magic Markets. We are officially in the second half of 2026. We are almost at the end of the FIFA World Cup. We are seeing some rather interesting headlines around political interference from North America, there, Moe.
Some very interesting Formula One results - and of course, we've had a lot of stuff happening in the market, so we won't get too distracted by sport. Instead, we will rather look at what has happened in the latest quarter from a macro perspective. Some big global shifts as well.
And then, Moe, I've got a list of JSE stocks that I would like to talk about. Some good, a couple of bad, as always.
We'll bring our listeners a nice whirlwind overview of what's going on out there, as usual. So, welcome to the show.
Mohammed Nalla: Indeed, Ghost. Always fun to do this. And certainly, as we've just gone past a quarter end, ending Q2 of 2026, it’s hard to believe we're kind of over the hump. We're now in the second half of the year. But as you've mentioned, these times are usually a good time to just do a quick litmus test on what's gone on in markets, because it's really been quite a busy quarter.
If you're going to go into specific names on the JSE, I'll actually kick off this week because I want to do the whirlwind global tour, if you want to call it that - which markets have actually done well, not just the US, but what's been happening across asset classes.
We saw big moves in oil, big moves in gold as well. If you look at the last quarter, it really was a story of equity markets first and foremost. Bonds really didn't do that much.
If you were actually a traditional 60/40 investor, then this was actually not going to be a good quarter for you if you were underweight equities, just because you're a little bit risk averse and so forth.
Bonds not doing a lot, equity shooting the lights out, and a lot of that was really driven by the US. But incidentally, it wasn't the US that was the best-performing global market in dollar terms. That accolade actually goes to the South Korean market.
And again, you can choose whether you're looking at the MSCI Korea or if you're looking at the KOSPI index. But I'll look at the KOSPI, and over the last quarter that delivered a staggering over 45% return.
And the reason I want to start there rather than the US is, it's effectively the same story. It's a story around AI hardware; it's the chip manufacturers and the big beneficiaries in that Korean market being SK Hynix and Samsung.
Effectively, that performance was so strong that it didn't just pull up the KOSPI, it pulled up the MSCI Emerging Markets Index as a whole, to then outperform the S&P 500.
So that tells you the kind of outsized moves we've had. And it's very important to note because if you're an investor in global ETFs or indices, if you look at something like the MSCI Emerging Markets Index historically, that gave you a nice diversified emerging markets exposure. But if you're looking at the concentration risks at present underlying that index, it's now just as skewed to the big tech names, the AI theme, as you would pick up, for example, on the S&P 500.
So, I would say: be very cautious around some of those headline indices simply because it's becoming less diversified than you would have expected in the past.
Before I actually hop off in terms of that global run-through on regions, we've mentioned the S&P has done quite well. Then if you look at Europe, Euro Stoxx, that was up between 10% and 12% over the course of the last quarter, pretty decent.
Japan, pretty decent as well.
India, now you're moving into the single-digit space, right? India, lots of concern in the earlier part of the year around valuations. However, that market is outperforming China, which I just want to highlight, that was the disappointment over the course of the last quarter.
China is down around 7.5%. Some concerns there. We've covered some stocks in Magic Markets Premium with Chinese exposure. But China, even if you're buying that on a deep value or a valuations thesis, this quarter certainly didn't like that.
And then on other major markets, gold: some pretty big moves there, down around 10% over the course of the last quarter. And then lastly, oil - we had the war coming through, we had the massive pressure. So again, base effects coming through there. We started out the quarter with oil above $100, and as we're speaking right now, it's in the lower 70s per barrel. So that's a massive downdraft.
I just want to say, I give a quarterly update to some of my institutional clients going into the start of the year. Thankfully it was bullish gold, was bullish oil. Now I actually took that off, and I say thankfully I took that off at the end of Q1 simply because of where markets had gone.
And a lot of people were saying, “Moe, you're a chronic gold bull. Why is this actually happening?”
When markets dislocate to the extent that you saw in oil, in gold, you've got to actually be disciplined enough to say, “Look, it's overdone, and I actually think it's time to trim some of that risk.”
So that's the world view if you want to look at that, Ghost. What's very important to note as well is it wasn't a generic risk-on flavour over the course of the last quarter. Because if you look at other risky assets (I would couple Bitcoin in here, for example), Bitcoin is not having a fantastic quarter: that was down between 6% and 10%.
Very volatile, of course. And so, the reason I highlight that is because quite often these risk assets tend to rally. They correlate together. That's not the story over the course of the last quarter, if I were to narrow it down, it really was a story around US semiconductors.
And I'm going to wrap this particular segment by just looking at that sectoral view, specifically in the US, because the numbers will just blow your mind. If you look at the performance of some of the stocks in that tech sector, this will not be news to our listeners, but it's just worth highlighting.
Micron Technologies up over 170%. 170% in a single quarter. That blows the mind. You compare that to Nvidia, which is around 10%, and it shows you the massive divergence just even within that sector. If you look at other names, you've got SanDisk in there. That also was up to 155% over the course of the last quarter.
We’ve just seen these absolutely stellar performances - Dell, 143%.
To narrow that down, it really was a hardware versus software story. We saw some pressure. Software names, Microsoft pretty pedestrian, around 3% over the last quarter.
But where was the bad news? We've mentioned oil and gas, but if you look at defensives, quality stocks like Walmart still down around 12.5%. So that wasn't a great place to go and try and hide. If you look at utilities, also the sector not really enjoying it as that rotation came through.
Last point I want to land on, Ghost. It hasn't been static. We've seen those massive moves when those moves dislocated. You also saw similarly large moves to the downside. After a rally in Micron to these record high levels, you saw double-digit moves in subsequent trading days. So, lots of volatility out there.
I'm not going to touch on the SpaceX IPO that happened over the last quarter as well. I know you might have a couple of words to share on that, but boy, has this been a fun quarter. I guess fun if you actually positioned correctly. A little bit stressful if you weren't actually positioned the right way around.
And so, the question mark right now is where do we go to from here? Earnings estimates from analysts have actually been revised higher. So, the underlying results seem to be coming through even in some of these big tech names.
It's not to say they haven't rerated and that the valuations aren't even more extended, but it's just to say that it's not just all hot air. Yes, there's a lot of hot air in the market, but there's also a lot of underlying momentum in some of these names. And that means you've got to be a stock picker, and you've got to be quite circumspect around that as well.
Lastly, Ghost, on a regional basis, South Africa is a resource-heavy market. So that pops up on my screen, that gold price pressure came through, that hurt a couple of the gold stock names there. At a macro level, what I saw in South Africa is, resources came under a lot of pressure. But I'm keen to hear what was happening beyond the resources story down on the JSE.
The Finance Ghost: Yeah, as you say, obviously the JSE is quite a resources-heavy market. And so, when you talk about those macro factors, the oil price, gold, platinum is another one that's important to think about. Obviously, that has a big impact on the local market.
I'll just touch on some of the bad news then. I was going to save it for later, but I may as well deal with it now because obviously gold, platinum, year-to-date, that's not been where you wanted to be ultimately.
Sibanye-Stillwater has both platinum and gold, that's down around 40% year-to-date. The mining cycle continues to be a difficult place to invest. You either have to take a super long-term through-the-cycle view, or you have to be brave enough to actually try and play the cycles.
I may as well finish off then with the bad news, because then I was actually going to focus on positives, and by no means is this meant to be a comprehensive look at what's going on, on the JSE. This is just some of the stuff that I thought was interesting.
The clothing sector, retail has been difficult this year. A number of the names have had a pretty tough time. I think I've mentioned on this podcast before, but in case I haven't, Pepkor is my chosen name in that space. I went long on Pepkor, fairly recently, very long-term position.
I think it's going to be interesting to see what they do with the bank that they are building and everything else going on there. But overall, clothing sector has been very difficult.
Another name that has been smacked around is Prosus. May as well include Naspers in that as well. And as I think we've talked about before and we certainly mentioned in Magic Markets Premium, that is mainly because of what's going on with Tencent. Prosus has lost a third of its value year-to-date. So, it’s pretty nasty for people who were long Prosus, like yours truly. Again, long-term position.
I've still been tempted to add, but I've kind of just held back a little bit, and I must say the recent Prosus results seemed okay overall for me. Nice free cash flow positive numbers in the rest of the group (excluding Tencent). But so much of that valuation is driven by what's going on in China.
So those are some of the tough names. Now I'll deal with some of the goodies.
And obviously when you've seen so much volatility year to date and you've seen these spikes in certain energy prices, it won't surprise you that a name like Sasol comes through. Still up 50% year-to-date despite everything and despite the big come-off in oil.
But here's the amazing thing. They’re currently sitting at around R157, 52-week high R242. So, if you went and bought too much into the hype, you have lost a lot of money there. The 52-week range on Sasol is R85 as your low and R242 as your high. It is not every day that the high is almost three times the low. It's actually quite incredible.
Obviously, what you wanted to do with Sasol, with hindsight and perfect timing, was to buy it before the Middle East crisis, wait for it to peak and then get out of there. And a lot of people have clearly taken profit, because obviously that price has come off pretty hard as you would expect.
Does it go all the way down to pre-conflict levels below R125? I'm not a Sasol bull, so personally I think it might. It's not a company that I'm invested in. We'll have to wait and see. But it is a very cyclical stock and obviously is highly impacted by prevailing oil prices and other issues.
Another name that got a big boost from the war, although in a very roundabout way, would be KAP. And that's because of Safripol, which in turn competes with cheap imports (specifically on your plastic raw materials and that kind of thing). And those imports suddenly were not so cheap anymore, when there was this huge disruption to global shipping and oil prices and everything else.
So that gave Safripol a bit of a boost. Yes, there's been some positivity around the PG Bison business. They've done a lot of capacity investment there. There's at KAP, these are names that you might remember, Moe, from when you followed the JSE a little bit more closely. I don't think these are names that are really internationally relevant. We'll see what happens there.
But it's 45% up year to date, which is really interesting. This one is a lot closer to the 52-week high than Sasol, so it’s currently trading at around R2.80. 52-week high, just over R3. So, it hasn't come off that hard. But the 52-week low is a long way down at R1.45. So watch this space.
I worry that a lot of the good stuff recently in KAP is actually coming from what we've seen at Safripol. I mean, they made it pretty clear in their results, so that is one to keep an eye on. I'll be interested to see if that share price manages to hang onto these gains.
I've got two more that have done really well this year that I want to mention. And then these are not names that have been boosted by the conflict, for example, or dislocations. These are actually names that have been getting stuff right for a while now, and have enjoyed some positive momentum.
Grindrod is the first one, trading very close to the 52-week high. It's not cyclical. It's all thanks to strong underlying performance in their logistics business. They've done a lot of work to clean that group up. They talk about their pit-to-port strategy, and it seems to be working really, really well.
Some of which is because of South African infrastructure challenges. But overall, it's just a nice logistics play into Southern Africa, which is a pretty thematically cool place to be.
Investors there are rewarding focus as opposed to the “spray and pray” strategies that we know don't work. They like a focused group, and that's what Grindrod has become. Kudos to them.
Another one that has been through a big turnaround, and I've got to say this has to be one of the best turnarounds I've ever seen really, is PPC. But they reckon that there's more to come, Moe, so as good as it has been, they think that they've got some gas in the tank here. Share price is up around 44% year-to-date and pretty close to 52-week highs, much like Grindrod.
So again, this is what happens when share price growth is thanks to sustainable underlying improvement, not external distortions like Sasol, or KAP obviously. And PPC has been a really good margin story above all, because you're not seeing much in the way of revenue growth. South African infrastructure demand has been rather tepid, so they've done a really good job of actually extracting some margin and really getting that last bit of juice out.
They call it their “Awakening the Giant” strategy. And of course, the idea here is they have all this capacity and if they could just actually get more of it operating and getting stuff out the door, imagine what the margins might look like then.
But another interesting point is that the capacity - yes, there's overcapacity in South Africa at a national level, but because of the amount of construction activity in the Western Cape, PPC is actually investing in capacity in the Western Cape even though countrywide there is spare capacity. So, it's just so interesting to see how regional these businesses are.
Obviously there's been lots of other good stuff as well, a couple of honourable mentions. Altron, AECI, Omnia, all up roughly 40% year-to-date. Stefanutti Stocks also up there as a speculative stock, so well done to people who punted at that (although the returns, nevermind year-to-date on Stef Stocks, there's some really big numbers if you go back a bit more).
Balwin also up there, but that's because of a buyout, and special mention as well to Aspen, MTN, Sun International, all in the high 30s.
So, mining has not really been where you want it to be so far, year-to-date. It's been industrials, it's been some other interesting stuff, a little bit of telcos, couple of turnaround stories.
Stock picking will always be fun. I guess that's why we do the top-down, because owning index funds and taking those sort of thematic positions is a sensible thing to do. But equally, we all enjoy a bit of stock picking, and I think this shows not just the rewards but also the risks. Some big names that have lost a lot of money as well.
Mohammed Nalla: Ghost I actually love that. Because there are two things that stand out for me. One, there's a bit of interplay between what I discussed in the macro, and what you picked up in South Africa, for example, the Naspers Prosus story with China.
But what actually blew me away in terms of your update there is just how diversified some of the performances were on the JSE, versus what we saw in the US.
I covered quarterly performance. For context, it's pretty much an extension if you look at year-to-date. So, a Micron is up instead of 170%, it's up 250% on a year-to-date basis. I don't think it changes the fundamental story.
What it does change at the margins though, is some really high-quality names like Microsoft, that's actually still down 20% on a year-to-date basis. We've covered that in Magic Markets Premium, so I'm not going to detract from that.
One sector I didn't really see in your update and even in my update was the financial sector. If you actually look at the financial sector in the US specifically, banks on a year-to-date basis haven't been fantastic. Single-digit kind of range. But over the course of the last three months, they've actually come through. You've seen a solid bounce.
JP Morgan as an example, the litmus test of the big US banks, that just over the last quarter was actually up around 15%. Similarly with Bank of America, up around 20%.
And there's opportunity in that, because something I was watching over the quarter were some of your big credit card names: Visa, MasterCard. If you go and have a look at the quarterly performance, if you look at it point to point, it looks as though they've actually had a reasonable quarter. They're up.
I actually took a position in the middle of this last quarter, and that's because if you look at just one name, let's look at Mastercard. That stock started out the quarter around the $500 mark, but then got down to around $460, which is pretty compressed for a quality name like that.
And subsequently has rallied, now trading around $530. So, there’s lots of volatility within that quarter as well. And that is why I want to circle all the way back to that point around stock picking, around doing your research. A lot of the work we do in Magic Markets Premium as well, is that you go and you find these quality names that you might want to add, and you might not want to buy it at the time that we actually do the research.
But if you find your levels that you're comfortable with, stick to that discipline. That's what I've certainly been doing (eating my own cooking here). I saw some levels I like on some quality names, including Microsoft, including MasterCard, added those in on the quarter, and if we look at where we are today, we've actually seen a lot of that come back. We've seen some of those valuations bounce back again.
That's my shameless plug on Magic Markets Premium. It's only R99 a month, so you’ve got to go and check that out. There's an extensive library there of global stocks that we cover every single week. It's a deep-dive report. Go and see what we've got behind the paywall there. Only R99. I think that's fantastic value for someone who's interested in global stock views.
The Finance Ghost: And Moe, just before we call it for this week, just on your banking comments, so you're right, devoid of banks there, mainly because it just hasn't been a super exciting sector this year. I had a look now, the FINI 15 is up 5% year-to-date, which at the halfway mark is fine, I suppose, and there's been some positive sentiment. But not super exciting.
Obviously, what happened around the conflict hurt sentiment and there was a big risk-off, and it's bounced back pretty well actually, but it's still not quite back to where it was pre-conflict. So nice recent momentum, I must say. Almost 5% up in the past month. So basically, that entire year-to-date move is sitting in the last few weeks, really. We'll see what happens in the second half of this year.
Mohammed Nalla: Yeah, Ghost, to wrap the show, I think a lot of what you've seen in banks, maybe even property stocks, is because we're currently sitting at a watershed on rates, which we haven't touched on. We've done it in previous shows. You've had a new Fed chair over the last quarter, which we haven't touched on in this show. And so, as a result, a little bit of uncertainty.
Do we see rate cuts in the US? Are they going to be more hawkish? It's literally bouncing from one view to the next, from an FOMC meeting to the next FOMC meeting. And so, as a result, US bond yields were marginally up over the quarter. That may be filtering through to the financial sector.
And then the dollar (maybe the last litmus test) was pretty flat over the course of the last quarter, it was weaker, but it’s now starting to come through. So that's a lot to feed into a view as we inform the outlook for the quarter ahead.
Unfortunately, that is all we have time for this week.
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We hope you've enjoyed this. Until next week, same time, same place. Thanks, and cheers.
The Finance Ghost: Ciao.
