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By midday on Monday, the financial sector was still the best performer of all the sectors, despite the fact the Capitec’s share price lost more than 5%.
The financial sector improved with 0.68% and contributed towards a stronger market overall.
The All Share-index improved with 0.49% to 51 509 points and the Top 40-index gained 0.53% to 46 355. The index rose sharply in early trading and then moved sideways for the rest of the morning.
Of the other indices Industrials rose 0.55% and Resources 0.39%, but Gold was 0.34% lower on a slightly weaker gold price.
The drop in the Capitec’s share price was to be expected, after Moody’s has downgraded the bank’s credit rating by two notches and placed it on review for a further downgrade because of a lower likelihood of support from the SA Reserve Bank following the African Bank fiasco.
The SA Reserve Bank said in a statement following the downgrade that while the Bank respects the independent opinion of rating agencies, it does not agree with the rationale given in taking this step.
The Bank said Moody’s incorrectly justifies the rating action on the basis that Capitec follows a similar business model to African Bank. "The two lenders do not share the same business model.
"While both are active in the unsecured segment of the market, Capitec follows a very conservative approach to risk and prudent provisioning practices, and considerable diversification has been taking place in a steady manner in product, client and revenue streams," the Bank said.
By midday, Capitec traded at R204.90 which is 5.14% lower than Friday’s close. The share price initially dropped sharply and then stabilised, which indicated that investors realised that Moody’s has overreacted.
Capitec traded at a 52-week high of R243.56 on July 31 before the news of African Bank’s demise broke. The share price was since under pressure and is now 8.1% lower for the last 30 days, but is still 14.9% higher than a year ago.
Absa announced on Friday that it had removed all African Bank Investments Limited (Abil) investments from its Absa Money Market Fund.
Standard Bank [JSE:SBK] gained 1.14% to R140.70 and FirstRand [JSE:FSR] added 0.37% to R43.26.
That star performer in the Financial index was Sanlam [JSE:SLM] which reached another 52-week high on Monday morning. By midday the share price was 0.96% higher on R64.23, beating the previous high of R63.82 set last week. Sanlam’s share price gained 21.65% over the last six months and 34.3% over the past year.
Old Mutual [JSE:OML] traded 0.29% stronger on R34.60, but Santam [JSE:STN] lost 0.59% to R207.86.
The property sector continued its strong performance of late and three major property shares traded at new 52-week highs. Growthpoint [JSE:GRT] improved with 1.72% to R25.95 and Emira [JSE:EMI] gained 0.90% to R15.64. Redefine [JSE:]was 1.33% higher on R9.92.
