JSE ignores US stock run, eyes local rates

Johannesburg - The JSE did not respond as positively as Wall Street to the Federal Reserve's decision to keep US interest rates on record low levels for a considerable time.

The Dow Jones index closed at a new record on Wednesday on the prospects that interest rates will remain low until at least the middle of 2015, but the JSE was only marginally higher by midday on Thursday.

Low interest rates in the US is good news for local investors, as it encourages investors in developed markets to seek higher yields in emerging markets such as South Africa - and the JSE has already benefited immensely from that flow of capital.

But it seems South African investors have more on their mind than US interest rates, as the market waits to see what the South African Reserve Bank’s monetary policy committee decided on South African interest rates on Thursday afternoon.

Most economists think that rates will remain the same, but this morning there were growing expectations that the Reserve Bank might surprise with another hike in reaction to the higher inflation figures released on Wednesday. The rand discounted such a possibility by strengthening somewhat.

The upcoming futures close-out is also playing a role and that explained why the All share-index fluctuated quite a bit on Thursday, although it has been in a fairly narrow band.

By midday, the All share-index was only 0.13% higher on 51 240 points and the Top 40-index gained only 0.17% to 45 894 points. Technical analysts of Imara SP Reid said the Top 40-index is currently trading just above an important support level of 45 440 points and it is important that the level is not breached.

The star performer was the Financial index which gained 1.02%, as banks normally gain from higher interest rates. FirstRand [JSE:FSR], which released strong results last week, traded 2.17% higher on R45.10 and Barclays Africa [JSE:BGA] improved 1.53% to R164.99. Capitec [JSE:CPI], which dropped sharply after the African Bank debacle, are close to its previous highs again and gained 1.24% to R241.

Amongst the insurers Rand Merchant Insurance Holdings [JSE:RMI], which includes insurers like MMI Holdings, Discovery and Outsurance, is still trading at a 52-week high. On Thursday, the share rose 1.22% to R36.55, beating Tuesday high of R36.22.

Richemont [JSE:CFR] was still in focus in the Industrial sector, which was only 0.15% higher. Richemont traded at one stage at a 52-week low, but recovered later on. By midday, it was still 0.75% lower on R98.12 after losing more than 4% on Wednesday after announcing that political problems in China hampered sales growth in the area. Richemont is only 0.7% higher for the past year.

Remgro [JSE:REM], which on Wednesday announced that its asset value increased with 20% over the past year, was only 1c lower on R243.99.  Remgro’s share price has increased with 26% over the past year and that has eradicated the traditional discount between the asset value and share price almost completely.

Steinhoff [JSE:SHF] gained 0.37% to R54.81 on the news that directors are buying large numbers of shares in their own company. According to reports Christo Wiese bought shares to the value of R50m on the open market and Markus Jooste, the CEO, invested another R25m.