Trading update : 22 May 2025

From Jamie “Doomsayer” Dimon’s inflation alarms to Nvidia’s Jensen Huang lamenting chip diplomacy, the week in markets served up warnings and mixed signals. For example, emerging markets lit up just as Wells Fargo suggested it’s time to head back to US equities. On the local front, the rand jumped on Starlink sentiment, despite an inflation surprise. No-one can claim 2025 has been boring…

Doomsayer Dimon

JPMorgan Chase & Co. (JPM-NASQ) CEO Jamie Dimon is warning investors against complacency in the face of various risks, including inflation, credit spreads, and geopolitics. Quoted in a Bloomberg report, Dimon said the chances of elevated inflation and stagflation are greater than people think. He also cautioned that America’s asset prices remain high and that credit spreads aren’t accounting for the impacts of a potential downturn.

Nvidia pro China

Nvidia (NVDA-NASQ) CEO Jensen Huang criticised US restrictions on AI chip sales to China, calling them a “failure” and urging the White House to ease export curbs. According to Bloomberg, Huang argued that if American tech providers like Nvidia aren’t allowed to sell in China, local customers will spend their money elsewhere, and rivals like Huawei will fill the gap.

EMs light up

Traders continue to plough cash into emerging market (EM) exchange-traded funds (ETFs) like the iShares MSCI Emerging Markets ETF (EEM-NASQ) as risk-appetite grows. Flow this year turned positive again for the first time since early April, with the $9.7 billion Avantis Emerging Markets Equity ETF recording more than $1 billion in inflows in mid-May, its biggest jump in new cash ever recorded. That accounted for over half of the inflows into US-listed emerging market ETFs that invest across developing nations, according to data compiled by Bloomberg. Across emerging markets, China had the biggest inflow, with $669.1 million in the week under review after the world’s two biggest economies surprised with a massive, albeit temporary, reduction in tariffs.

Double dipping

A renewed wave of dip buying fuelled a rebound in stocks from session lows, with traders trying to look past the US downgrade by Moody’s Ratings that weakened the US dollar. The S&P 500 (VOO-NASQ) trimmed most of a slide that earlier topped 1%. Several strategists said any pull-back could be an opportunity to wade back into the market amid bullish momentum fuelled in mid-May by the US-China tariff truce, with some big banks watering down their recession calls.

Buy US equities

According to a recent investor note from a Wells Fargo & Co. (WFC-NASQ) analyst, investors should reduce their holdings of emerging market equities and buy US stocks instead, While shares in up-and-coming economies have outperformed the S&P 500 (VOO-NASQ) benchmark index this year, emerging market outperformance is typically correlated with a weak dollar, with the bank forecasting a stronger greenback while flagging the risk of China-US tensions.

De-dollarisation

Even before President Trump came to office, Chinese banks have been steadily replacing the US dollar with the yuan in international financing. Chinese banks have emerged as one of the largest lenders to developing nations in recent years. According to a Federal Reserve research paper, they now account for 26% of cross-border lending to emerging markets in 2021 and about 35% for developing Asian countries. Since the end of 2021, lending patterns have shifted abruptly. While China’s total overseas lending has changed very little, the market share of the US dollar in total lending rapidly fell, and the yuan’s share more than doubled to almost 40%, according to Bloomberg.

Rand jumps

The rand (ZAR) jumped to a five-month high as an offer by the SA government to approve Starlink boosted investor sentiment. The ZAR climbed after Bloomberg reported that South Africa plans to offer Elon Musk a workaround of local black ownership laws for his Starlink internet service to operate in the country.

SA rates hold?

South African inflation unexpectedly accelerated in April, reinforcing the case for the SARB to keep borrowing costs on hold as global risks cloud the economic outlook.

According to data from Statistics South Africa, consumer prices rose 2.8% from a year earlier, compared with 2.7% in the prior month. That figure missed the 2.7% median estimate of 14 economists in a Bloomberg survey.

MCG, Canal+ deal greenlighted

The Multichoice Group (MCG-JSE) and suitor Canal+ advised shareholders that the South African Competition Commission has recommended that the South African Competition Tribunal approve the proposed transaction. This decision is subject to a package of guaranteed public interest commitments proposed by the parties, including the participation of firms controlled by Historically Disadvantaged Persons and Small, Micro and Medium Enterprises (SMMEs) in the South African audio-visual industry. This package will maintain funding for local South African general entertainment and sport content, providing local content creators with a strong foundation for future success.

Sector focus: Iron ore

Iron ore prices are under pressure due to faltering demand in China and an expansion in supply, with prices potentially falling to $80 a ton in the second half of the year. Bloomberg reports that factors weighing on prices include China’s plans to shrink steel output, seasonal declines in steel production, and potential increases in iron ore shipments from Australia and Brazil. However, pockets of strength include resilient steel exports, government stimulus, and favourable trade talks, which could limit the downside, as well as increased demand from non-property sectors in China. This outlook could affect performance at major iron miners like BHP Group (BHPL-TRQX) and Rio Tinto (RIOL-TRQX).

Stock focus: Drinks 

Beverage company Diageo (DGEL-TRQX) reported a surprisingly strong quarter with sales growth of +5.9%, with volumes up +2.8%. The performance stems from US pre-tariff buying, but management seemed less concerned about tariffs than expected and reiterated their full-year guidance. However, high debt levels and a forward P/E valuation of ~17x look full.