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Johannesburg - Share prices on the JSE were seeking direction on Friday morning after the extreme volatility of the past few days.
The initial intraday graph of the All-share index and the Top 40-index, as well as other major indices, represented a V on Friday morning as profit taking took place in early trading before bargain hunting started again.
By midday on Friday both top indices were still marginally lower than the previous day’s close with the All-share index 0.48% lower on 48 289 points and the Top 40-index 0.57% lower on 42 291.
The industrial index was at that stage still 1.29% lower, partially because of pressure on Richemont [JSE:CFR], but the financial index was 0.08% higher. Resources shares were stronger with the resources index 0.99 higher and the gold index 1.03%
On Wednesday commodity prices and resources shares dropped sharply after a World Bank report indicated that the prospects for world growth is not as good as originally forecasted, despite a lower oil price.
On Thursday afternoon, however, commodity prices and shares rebounded sharply after the Swiss Central Bank announced it will no longer be able to support the Swiss franc to maintain a steady exchange rate against the euro.
Analysts interpreted the move as a signal that quantitative easing by the European Central Bank (ECB) is definitely on its way and it will lead to an inflow of cheap euros. The value of the franc immediately strengthened by 30%.
Quantitative easing would be a big boost for economic growth in Europe and the demand for, and prices of commodities. It means the ECB will buy bonds back from banks to inject more money into the economy, of which some will also reach emerging markets like South Africa.
Resources sector
The resources index moved steadily upwards on Friday, after a modest dip in early trading, with most of the major shares in the index edging higher.
Anglo American [JSE:AGL] traded 1.6% higher on R188.24 and BHP Billiton [JSE:BIL] gained 1.24% to R238.04. Glencore [JSE:GLN], one of the world’s biggest copper producers and traders, which was on a 52-week low on Thursday, fell further on Friday morning before recovering somewhat just before midday. At midday the share was only 0.26% higher on R42.60.
A sharp drop in the copper price to the lowest level in six years sparked the worldwide sell-off in commodities and shares on Wednesday.
Sasol [JSE:SOL] recovered for the second day and gained 0.80% to R371.96. The share is, however, still 36.7% lower for the last month and 42.1% for the last three months, due to the 60% drop in the oil price.
Oil recovered Friday morning and traded almost $2 higher on $49.62.
Sentiment did, however, not improve in the iron ore market and Kumba [JSE:KIO] and Assore [JSE:ASR] both lost further ground. Kumba dropped 0.23% to a new 52-week low of R229.45 and Assore traded 0.59% weaker on R145.86.
One of the big losers on Friday was Richemont, whose business is badly affected by the sharp rise in the value of the Swiss franc. The company, one of the world’s top watchmakers, incurred 40% of its cost in Switzerland, but only 5% of its income.
Its share price lost 13% on Thursday on the Swiss Stock exchange, but only 0.9% on the JSE. Friday morning, however, the share dropped another 4.02% to R92.05
Medi-Clinic [JSE:MDC] gained 7.5% on Thursday to a new 52-week high as it derives 50% of its income from its hospitals in Switzerland, but was the victim of profit taking on Friday as the share lost 0.54% to R110.34. The share is, however, still 52.7% higher for the past twelve months.
Massmart [JSE:MSM], which announced better than expected trading results on Wednesday, traded at one stage on Friday on a new intraday high of R159.06, but lost ground later and was at midday 0.89% higher on R157.83.
