The JSE continued its record-breaking streak with platinum stocks coming to the fore.

Bruce Whitfield:
Rudi van der Merwe is our market commentator this evening, he is from Standard Financial Markets and a record close for the market, 32 647, very exciting. But we look at, you know the resources counters are driving it, Sasol up, Anglo Platinum up, Impala Platinum up but it was also good to see that there was buying interest in the industrial sector and also in the financials today, not much, but there is some interest.

Rudi van der Merwe:
That's right Bruce, actually quite a, almost a pleasant close today, because a big chunk of the day we were actually in negative territory but then towards the end some of the commodity prices perked up a little bit and our market looked a lot better, as you mentioned with the platinum stocks specifically coming through, Amplats and Implats up both over two percent, and nice interest in the industrial sector as well which is nice to see and SAB's results obviously helping them along on the day and some of the more interest rate sensitive, the cash retailers as well, performing quite well on the day.

Bruce Whitfield:
Massmart had a nice trading update out today; SAB’s results were very strong.

Rudi van der Merwe:
They were and I thought they would disappoint on consensus numbers and they came through very strongly around 20 percent up which is very good considering the cost pressures that they have and it just goes to show the extent to which they are able to defend their portfolio with their really good brands and changing their mixes with their premium brand products. I think they were to some extent also helped with their emerging market exposure and those currencies obviously showing quite a lot of strength against the dollar during the year but a great performance from SABMiller.

Bruce Whitfield:
South Africa no longer their most profitable region, that honour if it is an honour, goes into Latin America; we will be talking to Malcolm Wyman, the chief financial officer of SABMiller later on in the programme. The Massmart trading update that is possibly what helped the cash retailers along, we’ve always thought the cash retailers and the wholesalers like Massmart would be more defensive than their credit compatriots and it seems to be coming through.

Rudi van der Merwe:
It certainly does. You can see in the PE multiples that these companies are trading at at the moment all in the sort of midteens pretty much on the cash retailers. I must say I think Massmart is probably the best managed of the retailers in South Africa but I have a little bit of concern just about the extent of durable goods - it is quite a big portion of their sales.

Bruce Whitfield:
Durable goods you are talking about computers, you are talking about washing machines and dishwashers and that sort of stuff.

Rudi van der Merwe:
TVs and that sort of thing, goods that people can avoid buying when they are under pressure.

Bruce Whitfield:
It is always fun to upgrade your television once every two or three years but when times are tight you know the TV, just put a box around it, it makes it look much nicer eventually and you can fool yourself into that particular way of thinking. Rudi van der Merwe, thank you more from him later.

Bruce Whitfield:
Rudi van der Merwe tonight's market commentator in the ‘World at Six’ studio. We heard from Bernard Kantor at Investec, you have not been a big Investec bull over many years Rudi, you do harbour concerns about Investec however they still continue to bring out their results on a Thursday evening just so that you can have the pleasure of commenting on then. Are there any glaring worries there? Bernard Kantor very confident that they have written off all they can write off, he seems very relaxed quite frankly about where Investec finds itself in the global banking pile at the moment.

Rudi van der Merwe:
Bruce yes he certainly seems quite comfortable I think just the problem is that they are still in the global banking pile and that is I am afraid a sector that is still going to endure significant stress over the next while. I don't think we have seen the end of the credit issues. You know subprime was just really an element of a larger credit bubble and we can see severe stress in for example residential housing market across the globe at the moment. The UK specifically looks severely overpriced, the IMF seems to think that those prices could come down 30 percent and the IMF doesn't say that sort of thing likely. The UK consumer specifically is also specifically under a lot of pressure, you can see that coming through in credit card receivables, and foreclosures and housing starts which are actually down 24 percent now in the first quarter.

The South African residential construction market is under a lot of pressure as well. Investec has a tremendous amount of residential housing exposure through their private bank and the like as well as through Kensington so that would be one of the areas that really concern me. Bad debts as well as you can see the impairments were up very significantly just you know a change in that book of 0.5 percent of the loans moved the numbers £40-million that just gives you an idea of what the gearing is to bad debts in banks, it is very significant. It's not like you can compare them to a shop, when people sell things at a loss that is one thing, pilferage is quite another and bad debts is like pilferages. It has got a massive gearing impact on the bottom line and that should be where the bulk of my concerns would lie. I think there is further credit stretch to come and specifically on property markets where Investec has a lot of exposure.

Bruce Whitfield:
And it came through in a Barclays update today as well, it is writing down another billion pounds worth of assets, it’s warning its profits will be lower as well. Barclays with a profit warning I mean it was unheard of a couple of years ago and the part that we care about there was a reference to Absa, it says; reported strong before tax growth reflecting modest income growth and again from the Visa IPO which offset a higher retail impairment. Three very important bits of information there that they are seeing stronger profit growth which is nice but they are also seeing higher retail impairment. They don't disclose just how high those retail impairments are but we have got to assume that they are fairly drastic.

Rudi van der Merwe:
Bruce part of the problem is that they are coming off such a very low base, a year or 18 months ago all the banks had bad debts at absolute record levels ever and longer term I think the average is closer to sort of 3 percent so there is still some way to go before one even hits average and these things typically overcorrect so you are going to see a swing past that in the wrong direction and then there is severe impact coming for the banks still in terms of the credit problems and the consumer stress that we are going to be seeing and there doesn't seem to be much that is going to be turning that anytime soon. You can see it in other companies as well where durable goods specifically where credit is exposed - saw JD group update that I think scared a lot of people.

Bruce Whitfield:
That came out yesterday and it did frighten the living daylights out of people yes.

Rudi van der Merwe:
It is not obviously the same market as Investec but it gives one an indication of what sort of stress consumers are under.

Bruce Whitfield:
When you want to see a consumer story I mean Verimark, talk about a company with a strong brand that came to the market and really has underwhelwed, its profits are down 50 to 75 percent and this is something which is in the South African mass-market that through its television campaigns just isn't selling what it used to.

Rudi van der Merwe:
That’s right Bruce and I suspect that is on the back of a number of last year that was down 50 or 70 percent.

Bruce Whitfield:
It was a shocker last year too yes.

Rudi van der Merwe:
I can't remember the exact numbers but it was terrible and also at the time the talk was that that was the bottom and things would look better from here on. We are seeing a similar theme in the global banking sector where people have thought that all the bad news were in the numbers and not long thereafter you get the feeling that and the statement that there is more to come.

Bruce Whitfield: Bruce Whitfield:
Rudi van der Merwe is our market commentator this evening, he is from Standard Financial Markets and a record close for the market, 32 647, very exciting. But we look at, you know the resources counters are driving it, Sasol up, Anglo Platinum up, Impala Platinum up but it was also good to see that there was buying interest in the industrial sector and also in the financials today, not much, but there is some interest.

Rudi van der Merwe:
That's right Bruce, actually quite a, almost a pleasant close today, because a big chunk of the day we were actually in negative territory but then towards the end some of the commodity prices perked up a little bit and our market looked a lot better, as you mentioned with the platinum stocks specifically coming through, Amplats and Implats up both over two percent, and nice interest in the industrial sector as well which is nice to see and SAB's results obviously helping them along on the day and some of the more interest rate sensitive, the cash retailers as well, performing quite well on the day.

Bruce Whitfield:
Massmart had a nice trading update out today; SAB’s results were very strong.

Rudi van der Merwe:
They were and I thought they would disappoint on consensus numbers and they came through very strongly around 20 percent up which is very good considering the cost pressures that they have and it just goes to show the extent to which they are able to defend their portfolio with their really good brands and changing their mixes with their premium brand products. I think they were to some extent also helped with their emerging market exposure and those currencies obviously showing quite a lot of strength against the dollar during the year but a great performance from SABMiller.

Bruce Whitfield:
South Africa no longer their most profitable region, that honour if it is an honour, goes into Latin America; we will be talking to Malcolm Wyman, the chief financial officer of SABMiller later on in the programme. The Massmart trading update that is possibly what helped the cash retailers along, we’ve always thought the cash retailers and the wholesalers like Massmart would be more defensive than their credit compatriots and it seems to be coming through.

Rudi van der Merwe:
It certainly does. You can see in the PE multiples that these companies are trading at at the moment all in the sort of midteens pretty much on the cash retailers. I must say I think Massmart is probably the best managed of the retailers in South Africa but I have a little bit of concern just about the extent of durable goods - it is quite a big portion of their sales.

Bruce Whitfield:
Durable goods you are talking about computers, you are talking about washing machines and dishwashers and that sort of stuff.

Rudi van der Merwe:
TVs and that sort of thing, goods that people can avoid buying when they are under pressure.

Bruce Whitfield:
It is always fun to upgrade your television once every two or three years but when times are tight you know the TV, just put a box around it, it makes it look much nicer eventually and you can fool yourself into that particular way of thinking. Rudi van der Merwe, thank you more from him later.

Bruce Whitfield:
Rudi van der Merwe tonight's market commentator in the ‘World at Six’ studio. We heard from Bernard Kantor at Investec, you have not been a big Investec bull over many years Rudi, you do harbour concerns about Investec however they still continue to bring out their results on a Thursday evening just so that you can have the pleasure of commenting on then. Are there any glaring worries there? Bernard Kantor very confident that they have written off all they can write off, he seems very relaxed quite frankly about where Investec finds itself in the global banking pile at the moment.

Rudi van der Merwe:
Bruce yes he certainly seems quite comfortable I think just the problem is that they are still in the global banking pile and that is I am afraid a sector that is still going to endure significant stress over the next while. I don't think we have seen the end of the credit issues. You know subprime was just really an element of a larger credit bubble and we can see severe stress in for example residential housing market across the globe at the moment. The UK specifically looks severely overpriced, the IMF seems to think that those prices could come down 30 percent and the IMF doesn't say that sort of thing likely. The UK consumer specifically is also specifically under a lot of pressure, you can see that coming through in credit card receivables, and foreclosures and housing starts which are actually down 24 percent now in the first quarter.

The South African residential construction market is under a lot of pressure as well. Investec has a tremendous amount of residential housing exposure through their private bank and the like as well as through Kensington so that would be one of the areas that really concern me. Bad debts as well as you can see the impairments were up very significantly just you know a change in that book of 0.5 percent of the loans moved the numbers £40-million that just gives you an idea of what the gearing is to bad debts in banks, it is very significant. It's not like you can compare them to a shop, when people sell things at a loss that is one thing, pilferage is quite another and bad debts is like pilferages. It has got a massive gearing impact on the bottom line and that should be where the bulk of my concerns would lie. I think there is further credit stretch to come and specifically on property markets where Investec has a lot of exposure.

Bruce Whitfield:
And it came through in a Barclays update today as well, it is writing down another billion pounds worth of assets, it’s warning its profits will be lower as well. Barclays with a profit warning I mean it was unheard of a couple of years ago and the part that we care about there was a reference to Absa, it says; reported strong before tax growth reflecting modest income growth and again from the Visa IPO which offset a higher retail impairment. Three very important bits of information there that they are seeing stronger profit growth which is nice but they are also seeing higher retail impairment. They don't disclose just how high those retail impairments are but we have got to assume that they are fairly drastic.

Rudi van der Merwe:
Bruce part of the problem is that they are coming off such a very low base, a year or 18 months ago all the banks had bad debts at absolute record levels ever and longer term I think the average is closer to sort of 3 percent so there is still some way to go before one even hits average and these things typically overcorrect so you are going to see a swing past that in the wrong direction and then there is severe impact coming for the banks still in terms of the credit problems and the consumer stress that we are going to be seeing and there doesn't seem to be much that is going to be turning that anytime soon. You can see it in other companies as well where durable goods specifically where credit is exposed - saw JD group update that I think scared a lot of people.

Bruce Whitfield:
That came out yesterday and it did frighten the living daylights out of people yes.

Rudi van der Merwe:
It is not obviously the same market as Investec but it gives one an indication of what sort of stress consumers are under.

Bruce Whitfield:
When you want to see a consumer story I mean Verimark, talk about a company with a strong brand that came to the market and really has underwhelwed, its profits are down 50 to 75 percent and this is something which is in the South African mass-market that through its television campaigns just isn't selling what it used to.

Rudi van der Merwe:
That’s right Bruce and I suspect that is on the back of a number of last year that was down 50 or 70 percent.

Bruce Whitfield:
It was a shocker last year too yes.

Rudi van der Merwe:
I can't remember the exact numbers but it was terrible and also at the time the talk was that that was the bottom and things would look better from here on. We are seeing a similar theme in the global banking sector where people have thought that all the bad news were in the numbers and not long thereafter you get the feeling that and the statement that there is more to come.

Bruce Whitfield:
Well certainly from Verimark, we hope certainly that there is more and we will wait for that. Rudi van der Merwe from Standard Financial Markets, thanks very much indeed.