Investors update: January 6 2023

South African factory activity expands in December

Highlights

• South African manufacturing activity expanded in December but business activity deteriorated further in the month due to persistent rotational power cuts.
• The seasonally adjusted Absa Purchasing Managers Index (PMI) rose to 53.1 points in December from 52.6 points in November.
• While the headline number is positive, the underlying picture is more mixed. Most concerning was the business activity index which deteriorated further in December, according to Absa.

Source: CNBC Africa

Our Takeaway

South Africa’s manufacturing sector was hugely affected by rotational power cuts last year – known locally as load-shedding – as state power utility Eskom struggled to keep lights on for long periods in Africa’s most industrialized economy. In addition, there is a likelihood of global supply chain disruptions due to an uptick in Covid cases in China in the near term, potentially causing a lot of uncertainty in broader economic activity and even growth. 

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Plesion Capital backs Uganda’s Xeno in $2m round

Highlights

• Social impact VC firm Plesion Capital has announced its inaugural investment of $500,000 in Uganda-based Xeno Corporation’s $2 million seed round, which was led by Beyond Capital Ventures.
• Led by founder and CEO Aéko Ongodia, Xeno is a fintech platform that helps Africans to plan, save and invest for their financial goals with or without internet access, and is already pre-installed on 14 million phones in Uganda.
• Plesion Capital is currently focused on African-based investment opportunities that have the potential to address major societal challenges across the continent.

Source: ABC

Our Takeaway

In Africa, most of the 428 million people working do not save or do not have their savings invested. For those who do, their savings consistently lose value to inflation and other charges. This demonstrates the size of the market opportunity and the potential for Xeno; its model and tech are aimed at addressing these challenges. With a growing customer base and a reported 97% retention rate, XENO plans to enter key markets such as Kenya and Nigeria.

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Stocks short sellers netted $300 billion in 2022

Highlights

• Traders who shorted stocks won big in 2022, according to S3 Partners, with shorted stocks recording a return of 30.8% last year.
• That means short sellers outperformed the broader market, which suffered its biggest losses since 2008. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite lost 8.8%, 19.4%, and 33.1%, respectively, last year.
• US short sellers particularly tallied $300 billion in mark-to-market profits on the average short interest of $973 billion.

Source: Yahoo Finance

Our Takeaway

When an investor sells a stock “short” they borrow shares from a broker and sell them in hopes of buying the stock back later at a lower price. This works best when the broader market is hurting. When the market gained value in 2019 through 2021, short seller returns came in below the major indexes but beat the averages when they ended the year down in 2018. More so, the total amount shorted last year was below 2021 when the $1 trillion threshold was broken, but higher than in 2018 through 2020.