JSE ends four-day run

Johannesburg - Gold shares were the biggest losers on Friday morning, when the JSE’s run of the previous four days came to an abrupt halt.

By midday the Gold index was more than 3% lower than the previous day, while the Resource index lost almost 1%.

Product prices seem to be a concern as gold reached its lowest level in nearly three months on Friday morning, while base metal prices such as iron ore were still under pressure.

By Friday midday the All-share index was back below 52 000 points and traded 0.38% lower at 51 883 points. The Top 40 index lost 0.42% to 46 477 points. Gold was at that stage 3.5% down, resources were 0.95% lower and the Industrial index was 0.29% weaker.

The Financial index, supported by strong results from Capitec [JSE:CPI] and Sanlam [JSE:SLM], did not change much.

News that the European Central Bank will cut eurozone interest rates - already at record lows - even further and embark on asset buy backs did not have much of an effect on Friday morning. It helped a bit on Thursday afternoon, but it seems that investors are now more concerned about local conditions than foreign capital inflows.

The ECB’s actions mean investors will have more cheap money to invest, leading them to seek higher yields in emerging markets like South Africa.

The spot price of gold has been pushed lower by a stronger dollar and an optimistic view about the American economy, which has taken the shine off gold’s safe-haven status. By midday the precious metal traded at $1 265.53 per fine ounce and R13 583.38 per kilogram.

Harmony Gold [JSE:HAR] was the biggest loser by Friday midday and shed 4.46% to R29.35. AngloGold Ashanti [JSE:ANG] lost 3.42% to R167.57. This means Harmony is now 23.1% lower than 12 months ago, while AngloGold lost 24.6% over the same period.

The other two major producers, Sibanye Gold [JSE:SBG] and Gold Fields [JSE:GFI], also lost heavily on Friday, but their share prices look much healthier over the long term. Gold Fields is only 5.9% lower for the year, after the share price dropped 3.74% to R49.00, but still 31.7% stronger for the past six months.

Sibanye’s loss of 3.62% to R23.99 on Friday morning means that the share price is now 143% stronger for the year.

In the resources sector companies exposed to iron ore are still under severe pressure. African Rainbow Minerals [JSE:ARM] lost 5.26% to R164.89 and Kumba Iron Ore [JSE:KIO] dropped 3.78% to R298.00. Both shares are already at 52-week lows.

Capitec Bank [JSE:CPI], which rose more than 9% on Thursday after a strong trading statement, improved by another 0.86% to R233.99. The bank predicts that earnings per share and headline earnings per share will exceed the previous period by between 18% and 22%.

Read: Capitec shares surge on earnings news

The statement did much to put investors at ease about the bank’s prospects and emphasises the fact that its business model is totally different to that of African Bank, which ran into trouble by granting unsecured loans to the emerging market.

Read: African Bank rot may be worse than anticipated

Capitec said it grew transaction income significantly over the half-year ended August 31, as it attracted clients in higher income groups “who do more transacting”.

Sanlam [JSE:SLM], which announced earnings growth of 27%, was unchanged at the previous day’s 52-week high of R68.97. The earnings growth was already discounted as the company released a trading update last week.

 - Fin24