Banks tumble as conditions deteriorate

I may have spoken too soon after banks appeared to take the Reserve Bank's surprise cut in interest rates in their stride on Tuesday. Yesterday, they fell sharply. Nedbank was worst hit, sagging almost 12% after it withdrew its guidance for the year due to the rapid deterioration in conditions since it released its annual results in early March. The others will be affected just the same.

Companies across a number of sectors are scrambling to work out the potential impact Covid-19 and lockdown conditions will have on their earnings but admit it's impossible at this stage due to uncertainty over how it will play out. Schroder European Real Estate Investment Trust is the latest to warn investors that dividends could be on hold for the remainder of the year due to the pandemic.

Meanwhile, AngloGold Ashanti says it's starting to get most of its affected mines up and running again - with the exception of the Mponeng mine in South Africa that it is selling to Harmony Gold Mining.

Ingham Analytics has recently issued two notes under the "The Market's Twin Towers" title. This is now followed up by "Earnings, Earnings, Earnings - What will you pay for them now?" The note examines the prospects for corporate earnings. How far will earnings fall because of Covid-19? What would the market be prepared to pay for those earnings? Extensive US data is examined too. Click here to read.

In case you missed it, the curiously titled "The volatility of low volatility" will be of topical interest. Ingham Analytics analyses the striking phenomenon of why low volatility, low beta, higher Sharpe ratio (risk adjusted return) stocks have performed relatively poorly in this Covid-19 induced market upset.

Also in today's newsletter, Datatec is still considering listing part of its Logicalis business in Brazil and Net1 has withdrawn its option to buy a further 35% stake in Liechtenstein's Bank Frick. Finally, Combined Motor Holdings has warned that it's likely to report a decline in full-year earnings.

Take care.

Stephen Gunnion

Managing Editor, InceConnect

The 31 May CPD Deadline is approaching

The InceConnect CPD Hub now offers over 50 online courses offering FREE CPD and specialistcontent like:

Upload your certificates from your phone or PC to a CPD SCORECARD, track your hours and share with compliance.

Check out the FREE TRIAL now!