While the US is showing signs of a supportive environment for stocks (the AI theme remains strong) and business acquisitions, China continues to attract significant investor funds, with more growth on the horizon. Restructuring is also emerging as a strong theme as companies look to downsize and right-size to unlock value and support growth.
Fed pivot
Big downward revisions to May’s and June’s jobs data were a game-changer for the economic outlook in the US! The Fed’s full employment mandate now looks under greater threat, while a weaker labour market implies less risk of second-round inflation effects from tariff rises. Expectations are that the Fed will now resume its cutting cycle in September, rather than December, which is good for equities.
In the zone
The EU finally struck a tariff agreement with the US. While conditions are less favourable than hoped for, it has staved off an escalated trade war. As such, the eurozone’s GDP growth forecast remains unchanged at 1.3% for 2025 and 1.4% for 2026. Indicators pointing to underlying signs of momentum include looser monetary policy, inflation within target, and a bullish outlook on the euro. French political developments represent a near-term downside risk.
M&A away
Goldman Sachs Inc. expects a major ramp-up in dealmaking toward the end of the year, with a chance that 2026 proves a record year for M&A, according to a Bloomberg report. The bank predicts deal flow of around $3.1 trillion globally this year, rising to $3.9 trillion in 2026. That would surpass $3.6 trillion of M&A in 2021, according to figures from research firm Dealogic.
US equities bull
Morgan Stanley’s Michael Wilson believes US stocks will continue rallying after four months of gains as Federal Reserve interest rate cuts coincide with robust corporate earnings. Bloomberg quoted the strategist, who correctly predicted a rebound from April’s selloff, and now expects the economy to head into an “early cycle backdrop,” where nominal earnings continue to pick up alongside a drop in borrowing costs. Moreover, rate-sensitive stocks such as small caps have underperformed this year, suggesting room for a catch-up, he added.
China flows
Exchange-traded funds (ETFs) that buy China stocks attracted fresh inflows for a third consecutive week as optimism around the Asian nation gains momentum. China-specific ETFs that recorded gains include the KraneShares CSI China Internet ETF (KWEB-NASQ), which saw $78 million in inflows, and the iShares MSCI China ETF (MCHI-NASQ), which recorded almost $73 million.
Double trouble
President Trump said India has offered to cut its tariffs after the US doubled its imposed levies from 25% to 50% as punishment for its purchases of Russian oil. It wasn’t clear when the offer was made, or whether the White House plans to reopen trade talks with India. Bloomberg reported that levies hit more than 55% of goods shipped to the US — India’s biggest market — and hurt labour-intensive industries like textiles and jewellery, but electronics and pharmaceuticals were exempt, sparing Apple Inc.’s (AAPL-NASQ) massive new factory investments in India, for now.
AI-fuelled boom
The S&P 500 (VOO-NASQ) can soar another 20% by the end of next year on the back of an AI-driven “technological revolution,” according to Evercore ISI strategists quoted in Bloomberg. The firm’s 7,750 target for 2026 is Wall Street’s highest so far.
Split sauce
Kraft Heinz (KHC-NASQ) will split into two separately listed businesses to set free the higher-growth ketchup and condiments business from the low-growth grocery cash cow. Warren Buffett publicly berated the idea and the market agreed, with the stock sinking -7% overnight.
Restructuring talks
After shuttering two smelters in May, Glencore Plc’s (GLN-JSE) ferrochrome venture in South Africa with Merafe Resources Ltd. (MRF-JSE) has started restructuring talks that may lead to job losses. The Glencore-Merafe joint venture has five complexes that transform chrome ore into ferrochrome used to manufacture stainless steel.
Raiding the pot
Alexander Forbes Group Holdings Ltd. (AFH-JSE) clients withdrew almost twice the amount expected since the introduction of a new law enabling South Africans early access to a portion of their retirement savings. Bloomberg reported that the company processed 650,000 claims worth R9.5 billion in the past 12 months, mainly to cover debt and living costs, with more than 35% of members withdrawing most of their once-off seed capital allocation.
Stock focus: Bidvest
Bidvest seems to be putting a tough year behind it. Sales were slightly lower this year, down 1%, and profits from day-to-day operations slipped 3% if you strip out the effect of acquisitions and the closure of the company’s financial services unit. Headline earnings per share (HEPS) — a key measure of profit — dipped 1% to 1,949 cents, though the fall would have been bigger without some tax relief. Looking at the bigger picture, short-term growth numbers are skewed by Covid, but over the past 10 years, HEPS has grown at an average of 6.7% a year. During the year, the company bought nine other businesses, spending more than R9 billion. However, its acquisition pipeline is now fairly empty. Return on equity (RoE) — a measure of how well the company uses shareholder money — slipped to 18.8% and is expected to stay below 20%. The business generated R4.1 billion in free cash flow after all expenses (including capital spending, leases, and staff share payments). That’s a cash conversion rate of 62%.
Sector focus: Automotive
Based on August automotive figures, new car sales are still on fire in South Africa, up +18.7% for the month. Importantly, new passenger car sales rose +22.5%, signalling consumer confidence. The 3-month moving average has been above 10% since November last year and over 20% since March, showing strong consistency in the sector. Motus Holdings (MTH-JSE) performed well, with its big three import brands up +10% in aggregate, with Kia sales jumping +20% and Hyundai up +11%. The average growth for Motus brands (Hyundai, Kia and Renault) since the start of the company’s new financial year is 19%. All eyes are now on the Tata launch next month.
