Trading update : 13 June 2025

Backroom dealings between Washington and Beijing are helping to ease global trade tensions, boosting investor sentiment and sending US markets to near all-time highs. However, the US exceptionalism theme continues to unwind, with opportunities for better returns emerging outside the US. Locally, cracks in the manufacturing sector are widening while Discovery battles medical plan downgrades. However, we profile two local stocks showing immense promise.

Tech trade-off 

China and the US have agreed in principle to a framework for implementing the consensus on trade and tariffs they reached in Geneva. News reports suggest that the US will likely ease technology controls in return for China approving export licenses for critical minerals, with possible concessions including walking back plans to revoke and restrict Chinese student visas. The agreement represents a tactical de-escalation, providing near-term relief for supply chains, but leaves the underlying tech rivalry and potential for future friction in place.

Tariff tug-o-war

A federal appeals court has allowed President Trump to continue enforcing his global trade tariffs, granting a win for the president on one of his signature economic policies. Bloomberg reported that the US Court of Appeals for the Federal Circuit extended an earlier reprieve for the administration, which is challenging a lower court ruling that blocked the tariffs, and scheduled arguments for July 31.

US bank red flag

In a potential warning to investors with exposure to US banks, Bloomberg reports that Citigroup Inc. (C-NASQ) expects to set aside hundreds of millions of dollars more than last quarter to account for potential losses on loans due to the macro environment.

Something’s bubbling

As markets continue to pivot away from the US exceptionalism, the magnificent 7, private equity and credit themes that have hoovered up outsized chunks of capital for the past decade, signs increasingly point to a renaissance period for listed equities and international markets outside the US. The chemical sector is a previously shunned corner of the equity market that is already starting to see action. Global stocks like Lyondell (LYB-NASQ) rose +3.6%, with other industry players like BASF (+1.3%), Solvay (+1.6%) and Laxness (+2%) also rising earlier in the week. Locally, Sasol (SOL-JSE) rose another +4.7% on its march back to a triple-digit stock. Something’s bubbling in the chemical world… Ignore it at your peril!

NEPI Rockcastle joins Global Emerging Index

NEPI Rockcastle (NRP-JSE) has been included in the FTSE EPRA NAREIT Global Emerging Index, the leading global benchmark for listed real estate investments that provides investors with transparent and rules-based access to the performance of global real estate companies. The inclusion takes effect from 23 June 2025. While it should provide a helpful little boost to volumes and share price, it’s not a game changer.

SA manufacturing slumps

Manufacturing production in South Africa fell by a notable -6.3% y/y at the beginning of Q2, following a revised -1.2% y/y decrease in March. The outcome was weaker than Bloomberg’s reported consensus expectations of a -4,5% y/y decline. It could be much of the same in May, with advance indications provided by May’s PMI release showing that manufacturing sector conditions remained subdued during the month, which doesn’t bode well for the performance of the manufacturing sector.

Debt burden

Shares in diversified industrial, chemical and logistics group KAP Limited (KAP-JSE) fell -20% on the back of another poor update. The market reaction is another stark reminder of how interest costs can bite companies with large debt piles, especially when topline growth does not materialise. 

Discovery downgrades

Discovery (DSY-JSE) reported that a full nine of the 16 core Discovery Health Medical Scheme (DHMS) medical plan options saw declines in members in 2024 from 2023. Moneyweb reports that four plans saw year-on-year declines of over 5%, with two of its largest plans, Classic Comprehensive and income-limited KeyCare Plus, seeing year-on-year declines of -7% and -11% respectively. Its Classic Comprehensive has seen declines in members and beneficiaries for several years now.

New growth market for Capitec

Capitec (CPI-JSE) plans to launch a new unsecured lending product later this year, aimed at small businesses in the formal and informal sectors. Capitec estimates that South Africa’s SMME sector comprises around three million formal businesses, along with an additional three million emerging or informal enterprises.

Sector focus: Thermal coal

The Trump administration will propose scrapping Biden-era climate mandates requiring power plants to curb greenhouse gas emissions, and will also advance a plan to ease limits on mercury and other toxic air pollution, according to a Bloomberg report. Opponents of the Biden-era limits argue they force the closure of coal-power plants and discourage new gas-fired facilities. The move could boost demand for thermal coal, which slowed slightly in 2024 according to World Bank data.

Stock focus: Premier Foods

Following some strong results, it looks like there is lots of growth ahead for Premier Foods (PMR-JSE). During its 2025 financial year, sales rose 7% and earnings before tax increased by 15%, with market share growth in bread and flour from its Millbake division. Despite the strong performance, bakery capacity constraints limited Premier’s ability to meet consumer demand for Blue Ribbon bread. In addition, maize profitability was severely constrained by record-high input costs. The price of maize has since fallen sharply, and a much-improved performance in the 2026 financial year is expected, alongside the benefits of expanded sweet confectionery production and highlighted improved trading in Mozambique since January. These factors should help drive robust double-digit earnings growth for at least the next three years.