The JSE pulled back a percentage point after a record-breaking run, largely on profit-taking.

Bruce Whitfield:
Patrick Mathidi from RMB Asset Management is tonight's market commentator and let's focus on what has happened on the JSE today Patrick because the market under quite a lot of pressure, at one stage more than a percent down, currency slipping very sharply, commodity prices rising but foreign investors I guess just for some reason not interested in South African shares.

Patrick Mathidi:
Hi good evening Bruce. Yes you are right I mean after a few successive days of all time highs on the market today we saw a sort of a decent pullback, at some stage down about 1.5 percent or so, the all share just down below one percent and the stocks that had been up higher of late were the ones today that were losers largely some of the gold counters, the gold index was up on the back of AngloGold but some of the stocks, Harmony, Gold Fields, was down and some of the heavyweights, Anglo, Billiton, after again reaching near all-time highs yesterday they did pull back quite sharply today.

Bruce Whitfield:
Just good old-fashioned profit-taking or something more sinister perhaps?

Patrick Mathidi:
Well I think you know earlier on in the session there was a report that came out from one of the brokers I think that sort of added to the nervousness. They were basically saying that the commodities have had a proper run, they are overvalued by their own calculations and they expect a near term 20 percent or so pullback and I think that set the tone for the session and by enlarge we ignored the higher precious price, gold for example and platinum, and also one would expect with the weakening rand that we will see some demand coming through for some of our rand hedgers, especially commodities.

Bruce Whitfield:
But that didn't happen.

Patrick Mathidi:
It just didn't happen.

Bruce Whitfield:
Sasol though that one did well, Sasol above R500 it closed for the first time and that share just nothing seems to hold it back.

Patrick Mathidi:
Well I mean the oil price is doing quite well, the oil price is around 125 or so earlier on, and again there were similar reports coming through sort of highlighting oil as just the one that is expected to remain stronger for longer. There were some predictions again from the stock broking fraternity suggesting that we could see 150 oil price by midyear and clearly that is of benefit to Sasol themselves and on a day like this combined with a weaker currency we did see Sasol hitting another all-time high.

Bruce Whitfield:
Couple of interesting moves as well in the mid-caps, Astrapak, not a great set of results coming out fairly recently, the last 10 days or so. The share price rocketing on Friday then speculations started emerging that Metier private equity group was looking to snap up shares in Astrapak. It looks like they have been busy once again today - the share price at one stage I think was up in double-digit terms.

Patrick Mathidi:
Yes I think you know over the last couple of days if not weeks I mean there has been quite a lot of volume going through so that speculation of a take-out does seem like there is some element of truth in it. I think the price we are hearing is somewhere around R10 or so of the take-out but I don't think anything formal has come out yet but the activity in the market certainly suggests that there is a bit of smoke coming out.

Bruce Whitfield:
Watching Astrapak with a great deal of interest and also watching Freeworld Coatings. The speculation there of course is that the minnow within the paint sector and that is Chemspec which is a KZN based company which is looking to take out Freeworld Coatings which is four or five times its size. At times like this it is interesting to see that there is not only the speculation but possibly the realisation of corporate activity.

Patrick Mathidi:
Well certainly I mean especially if you are sitting with highly rated paper you can pick up some of these assets that are lowly rated and I think if Freeworld were to go, I mean remember they were unbundled from Barlow, if they were to be snapped up they wouldn't have completed the year as a listed entity so it would be interesting to see what actually happens there but yes I suspect I mean not having looked at it recently I suspect it is very cheap, you know it is a decent business with sort of fairly modern plants and that if they are able to get their hands on it would be a great acquisition for them.

Bruce Whitfield:
Which is why Chemspec exactly wants it. Chemspec mainly in automotive paints, remember I told you about it recently, they got a contract in China they recently filled up a big container and sent that off to China but the automotive paints that they produce aren't incumbent by international production licences so they don't have the guys sitting overseas with the Dulux contracts or the Plascon contracts that say you may not export. The Chemspec guys have got their own intellectual property and that is what makes them look offshore and say there is great opportunity.

Bruce Whitfield:
Patrick Mathidi from RMB Asset Management is tonight's market commentator and you are probably one of the few people in the country who is actually grumpy with Pick n Pay Patrick over their decision to give R100 to Food and Trees for Africa for anyone who downloads one their annual reports because you guys, RMB, own a big chunk of Sappi and you want people to print as many annual reports as possible.

Patrick Mathidi:
It's true we are a big shareholders in Sappi, we remain positive on the stock, clearly they are in the fine coated paper industry and such initiatives do pull back demand for products and from an investor's point of view you know it is not…

Bruce Whitfield:
Think of the planet Patrick, think of the planet, it may not be good for the Sappi share price but it certainly is good for the planet the fewer people who take physical reception of annual reports the better. Astral Chickens, I like farming stories because I did grow up on a farm and I think you know the fact that chickens are 37 days old when they get slaughtered, eat 3 kg of grain and they think it's Christmas and the trouble is Christmas comes and they end up in a plastic bag but Astral chickens, really quite a few headwinds affecting Astral, the margins are under pressure, inflationary pressures in the chicken business are actually counting against them.

Patrick Mathidi:
Yes and we have seen sort of these headwinds coming through from other companies also and it is no secret that the grain price has been sort of spiralling out of control so I think they are caught in a very tricky situation on the input side where the costs are spiralling out of control and grain is a huge chunk of their total cost but also on the demand side they are getting a bit squeezed with a lot of substitution taking place and I do suspect that there is still a lot of cheap imports still coming into the country.

Bruce Whitfield:
He tried to play that down but I do get a sense and certainly from what Kevin Hedderwick from Famous Brands were saying last night they were fighting food inflation locally by importing beef, now they can't do that forever, but the fact that you can sometimes get your main commodity elsewhere at a cheaper price than it is being produced locally.

Patrick Mathidi:
Well exactly there is a lot of substitution taking place within that complete value chain.

Bruce Whitfield:
Are you an Astral bull if you can be an Astral bull or are you an Astral chicken at this stage in terms of the food cycle at the moment?

Patrick Mathidi:
No not at all I think there is sort of better value elsewhere. I think there are better companies like Tiger Brands and AVI that sort of play in that space that have better prospects and therefore from an investor's point of view you know one of the better players to be in those…

Bruce Whitfield:
Diversification being the name of the game.

Patrick Mathidi:
Well exactly but also when you look at Tiger Brands they have got decent brands, they are still managing to push through a lot of volume growth with a bit of price inflation coming through so you know in this environment I mean one could almost say that some of their offerings is a bit more defensive for example.

Bruce Whitfield:
Sanyati, we spoke to them, Aveng came out with a very nice trading update, 40 to 50 percent profit growth, order book from 22 to R29-billion. Construction sector shares have been booming ever since Murray and Roberts I think it was this time last week issued its own update it's been a very good week.

Patrick Mathidi:
Well exactly I mean it has been for the construction stocks, I think also after Stefanutti came out a few days ago with their numbers, Aveng was up 2 percent today it is up close to 15 percent on the month to date so that whole infrastructure spend theme thing is still playing itself out and if you look at the prospects which is something which is you know slightly different from the other guys who have reported but if you look at the themes within construction, the prospects, in terms of their forward-looking statements they remain very positive and you are seeing you know decent margin expansion coming through, decent pipelines in the form of their workbook, so yes it's a space that from a valuation point of view I think it is a bit stretched, there is a lot of the good news priced in, but the theme itself it will continue to hold for a bit longer.

Bruce Whitfield:
Patrick Mathidi, thank you very much indeed, he is with RMB Asset Management.