Simon Shares

• Tencent hit a new all-time high on Tuesday and again on Wednesday pushing Naspers (JSE code: NPN) and Prosus (JSE code: PRX) higher and helping the JSE overall.
• Gold seems to be breaking up out of the consolidation zone it has spent the last few months trading in.
• Good German PMI data, still under 50, but only just again suggests that April was likely the worst month. Albeit the route back to normal is going to be long and rocky.
• Mboweni budget;
  • No changes to taxes, but a rough budget. Some key points;
    • The South African economy is now expected to contract by 7.2% in 2020. This is the largest contraction in nearly 90 years.
    • Global GDP -5.2%, broadest collapse in per capita income since 1870
    • "A post‐lockdown future will require that we build high‐quality physical bridges, roads, railways, ports and other infrastructures.".
    • Some changes in the R200bn Covid loan scheme. Removed the R300m turnover limit.
    • South Africa will "shortly" fall into a sovereign debt crisis if it does not act urgently.
• The ASHGEQ* ETF is changing and needs your vote. Kristia writes about it here, but, in short, we'll have a cheaper TER after the process. 
• The delayed April CPI came in at 3%, lowest for 15 years and right at the bottom of the SARB inflation target range.
• How likely are you to win the lotto?
• Video: Investing globally, locally.

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The JSE is currently awash with capital raising. Some just because it makes sense to make their balance sheet stronger, others because they're in real trouble if they don't. The problem is that issuing new shares gives a permanent right to profits, loans are better, but right now bankers are not lending with abandon.

Some have been via a quick bookbuild

• Stor-Age* (JSE code: SSS) ~ R250million
• Transaction Capital JSE code: TCP) ~ R559.7million
• Pepkor (JSE code: PPH) ~ R1.9billion

Many others will be via a traditional rights issue;

• Curro (JSE code: COH) R1.5billon (non-renounceable)
• City Lodge (JSE code: CLH) ~ R1.2billion
• Sun International (JSE code: SUI) ~ R1.2billion
• Sasol (JSE code: SOL) ~ not confirmed
• Mr Price (JSE code: MRP) ~ R3.6billion (idea floated but not confirmed)
• The Foschini Group (JSE code: TFG) ~ up to R3.95billion

This raises a real issue for many shareholders, do you send cash and follow your rights? If you don't you'll be severely diluted, especially with the bigger issues. So you need to decide which you'll follow, but also keep in mind that some of these raising capital may well be back again in the months ahead for more money, and then maybe even again. If you're worried about repeated capital raises, then exiting early may be better than not.

I would also add that we will most certainly see a lot more capital raises coming, heck the property stocks haven't even started aside from Stor-Age. So the requests for money will keep on coming and at the end of the day, it's going to be a lot of money requested.

* I hold ungeared positions.

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