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Johannesburg - The recovery in the prices of resources stocks, which has been expected and predicted for a while now, got under way in a decisive manner on Friday morning.
By midday on Friday, the Resources index was almost 3% higher and it also pulled the rest of the market higher, including the All-share-index which again breached the level of 50 000 points.
The run in resources shares does not mean market conditions for commodities have changed, but is merely technical after analysts repeatedly said that these stocks are extremely oversold.
The run started on Thursday when the Resources index improved by more than 1%, despite the rest of the market being lower.
However, on Friday morning the All-share index gained 1.17% to 50 165 and the Top 40-index was 1.35% stronger at 44 905.
The Resources index was 2.5% higher and gold improved by 0.85% after the gold price also strengthened somewhat.
Resources stocks also received support from the weaker rand which dropped to the lowest level in four weeks against the US dollar on Friday, in reaction to the credit rating downgrade by Moody’s late on Thursday.
READ: Moody's downgrades SA credit rating
Moody’s cited South Africa’s poor prospects for medium-term growth and rising public debt as the main reasons for cutting the economy’s credit rating to Baa2 from Baa1.
Moody’s did, however, adjust South Africa’s outlook from negative to stable, while identifying ongoing energy shortages and rising interest rates as a lag on the economy.
A weak rand means South African commodity producers receive more for their exports in rand, although a strong dollar is detrimental to commodity prices, particularly the gold price.
Among the top resources shares Anglo American [JSE:AGL] was the star performer, improving 4.4% to R24.35. BHP Billiton [JSE:BIL] was 3.57% higher at R298.97.
Iron ore companies, which lost almost half of their value in the last few months due to a sharp drop in the iron price, also recovered somewhat on Friday morning.
Kumba [JSE:KIO] gained 1.42% to R282.60 and Assore [JSE:ASR] was 3.95% higher at R217.98, but the share is still 48.6% lower for the last six months.
African Rainbow Minerals [JSE:ARI], which was hard hit by the drop in Assore’s share price, recovered by 2.37% to R140.25.
The share prices of the big industrial companies, which earn a major part of their income abroad, were also supported by the drop in the value of the rand.
The Industrial index was 1.11% higher by midday and is now fast approaching an important resistance level at 61 000.
Richemont [JSE:CFR], which has been under a lot of pressure lately because of the poorer economic prospects in Asia, responded strongly and traded 5.89% higher at R97.42.
Naspers [JSE:NPN] was only 0.51% higher at R1 393.27 and SABMiller [JSE:SAB] gained 1.44% to R632.82.
In the retail sector Truworths [JSE:TRU] stabilised on Friday after the share price lost 7.4% on Thursday on a subdued trading report and the news that the company has identified a foreign successor to CEO Michael Mark.
Sales for the first 18 weeks of the 2014 financial year increased by only 4.7% to R3.7bn.
By midday on Friday the share price was only 0.39% weaker at R68.73 and has now lost 20% over the last six months.
- Fin24
By midday on Friday, the Resources index was almost 3% higher and it also pulled the rest of the market higher, including the All-share-index which again breached the level of 50 000 points.
The run in resources shares does not mean market conditions for commodities have changed, but is merely technical after analysts repeatedly said that these stocks are extremely oversold.
The run started on Thursday when the Resources index improved by more than 1%, despite the rest of the market being lower.
However, on Friday morning the All-share index gained 1.17% to 50 165 and the Top 40-index was 1.35% stronger at 44 905.
The Resources index was 2.5% higher and gold improved by 0.85% after the gold price also strengthened somewhat.
Resources stocks also received support from the weaker rand which dropped to the lowest level in four weeks against the US dollar on Friday, in reaction to the credit rating downgrade by Moody’s late on Thursday.
READ: Moody's downgrades SA credit rating
Moody’s cited South Africa’s poor prospects for medium-term growth and rising public debt as the main reasons for cutting the economy’s credit rating to Baa2 from Baa1.
Moody’s did, however, adjust South Africa’s outlook from negative to stable, while identifying ongoing energy shortages and rising interest rates as a lag on the economy.
A weak rand means South African commodity producers receive more for their exports in rand, although a strong dollar is detrimental to commodity prices, particularly the gold price.
Among the top resources shares Anglo American [JSE:AGL] was the star performer, improving 4.4% to R24.35. BHP Billiton [JSE:BIL] was 3.57% higher at R298.97.
Iron ore companies, which lost almost half of their value in the last few months due to a sharp drop in the iron price, also recovered somewhat on Friday morning.
Kumba [JSE:KIO] gained 1.42% to R282.60 and Assore [JSE:ASR] was 3.95% higher at R217.98, but the share is still 48.6% lower for the last six months.
African Rainbow Minerals [JSE:ARI], which was hard hit by the drop in Assore’s share price, recovered by 2.37% to R140.25.
The share prices of the big industrial companies, which earn a major part of their income abroad, were also supported by the drop in the value of the rand.
The Industrial index was 1.11% higher by midday and is now fast approaching an important resistance level at 61 000.
Richemont [JSE:CFR], which has been under a lot of pressure lately because of the poorer economic prospects in Asia, responded strongly and traded 5.89% higher at R97.42.
Naspers [JSE:NPN] was only 0.51% higher at R1 393.27 and SABMiller [JSE:SAB] gained 1.44% to R632.82.
In the retail sector Truworths [JSE:TRU] stabilised on Friday after the share price lost 7.4% on Thursday on a subdued trading report and the news that the company has identified a foreign successor to CEO Michael Mark.
Sales for the first 18 weeks of the 2014 financial year increased by only 4.7% to R3.7bn.
By midday on Friday the share price was only 0.39% weaker at R68.73 and has now lost 20% over the last six months.
- Fin24
