Bruce Whitfield  00:18

Onto markets, it will be a quick chat with Arthur Karas this evening. Markets fell, but the currency on a nice recovery path, Arthur Karas. 

Arthur Karas  00:28

Yes. I think that we can all understand why the currency has been weak. We've got a strong dollar and we've had lots of talk of loadshedding and its impact on the economy. And we've had a series of interest rate hikes that are starting to weigh on the consumer. But I think that people are starting to recognize the fact that there's a lot of bad news in all of our markets, that the bond market, the currency market, and the local equity markets, and people are starting to take notice.

Bruce Whitfield  00:56

I mean, absolutely. And it's nice to see because the currency has blown out very, very significantly. And we're not going to ask you for a level on the currency this evening. Everybody's asking me and I'm bored of the question, but it strikes me as very clear that perhaps the days of the boom dollar are perhaps past for now.

Arthur Karas  01:15

It very much has to do with the path of interest rates, or the path or the size of the gap between the interest rates that you see in South Africa and other emerging markets and the interest rates in the US. So, if it's... if their interest rates peak, and people start to look forward to the interest rates falling, then investors will start to look for other markets where they can earn a better rate even if they have to take a little bit more risk. So, I think that's very much the pattern that one would expect to see playing out. 

Bruce Whitfield  01:43

One set of results today, Oceania, that seems to... I don't know, what does a shipping company do. Turn a corner? Float a boat? I'm not too sure, but they seem to be recovering.

Arthur Karas  01:53

Well, Oceania is a fishing company. So, it's a company that puts petrol and diesel into ships, goes out to sea, catches some fish, and sells it, so they're a beneficiary of the weak Rand. They suffer when the oil price goes up, so a lot of volatile inputs there, but they appear to be doing well in the current environment and the market likes the fact that they sell their product in dollars in many cases.

Bruce Whitfield  02:20

Yeah, and they do very well on pilchards. Of course, Tito Mboweni is ambassador - unpaid ambassador number one - of the pilchard industry and it's a core part of what they do.

Arthur Karas  02:32

Absolutely. The way to look at it is that if you're a consumer and you go to the shops, you need to put some protein into your basket and you're weighing up what is a tin of pilchards going to cost you relative to what a portion of chicken is going to cost you. So, that's an important calculation that comes into many people's minds when they're at the shops and pilchards definitely form part of that choice.

Bruce Whitfield  02:58

We're getting a nice fuel price cut on Wednesday, I suspect it's going to be short lived because Opec+ has decided to cut production and we're already seeing the oil price respond to that. Are we expecting a blowout? I mean, I just feel that a couple of things are beginning to fall into place, Arthur, from wrist slitting over the last four weeks to - like four to six weeks - of real misery and despair. I'm wondering if a couple of corners aren't being turned in terms of macroeconomic issues, slowing interest rates, perhaps market stabilizing just a little bit and maybe some respite for the currency?

Arthur Karas  03:32

Well, we've got two big stories at play here. The one is where is the US going? Is the US about to slip into recession? Or is it going to see a soft landing? If it sees a soft landing, then we're in a position to not see further dramatic interest rate hikes, and we'll see a gentle recovery in the company's profitability and the world's just down that path. Or we see a recession and things get really tough there and the consumer comes under pressure, and they spend less money, and they drive around less. 

On the other side of that equation is China. So, China's still busy reopening from Covid. But it all looks a little soft. And people are concerned that the Chinese are not building more homes, that they're not spending money. And we've seen a little bit of stimulus on that side as well trying to encourage the homebuyers. So, that's the other part of the story that we're waiting to see developing. 

And then on the side, you've got the oil price, where you've got where is the supply going? And at the moment, it looks like people are saying, well, got plenty of the stuff around,  economies have recovered somewhat, and we don't expect there to be a big issue with oil shortages. But the Saudis appear to be quite keen to put a floor under that price. And I think it's the second time they've come around and said we need to be careful; we're going to cut production; we're not going to allow prices to just fall away. So, that's a part of that, very much a part of that story. And you can see in South Africa, the impact that this has had on Sasol, it had some of its own problems, but definitely the weaker oil prices weighed on that share price. So, a bit of a thermal oil price in the future for that will definitely be better for Sasol, even if it will hurt the consumer. 

Bruce Whitfield  05:27

Arthur Karas, thank you, Portfolio Manager at the Old Mutual Investment Group. That fuel price cut coming through on Wednesday, 71 cents a litre on both grades of petrol. The wholesale price of diesel dropping by at least 80 cents a litre. A little bit of good news coming through in the doom and gloom of every day.