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JSE suffers from election blues

Johannesburg - The JSE had the election blues on Tuesday morning with the major indices hovering around the previous day’s closing levels, after a strong opening rally fettered out immediately.

The All-share index shot up on Tuesday morning to well above 49 000 and close to last week’s record levels, but then profit-taking kicked in and the index fell back to below 49 000, before turning slightly more positive just before midday.

The attention was mostly on local news, which was predominantly not good, as there was no new major economic news from abroad to influence the markets. Overseas markets are still concerned about the deteriorating situation in Ukraine, but the local market is apparently not influenced by the uncertainty.

By midday the All-share index was only 0.12% lower at 48 821 while the Top 40 index also traded 0.12% lower at 43 724. All the major indices were also slightly lower, with the exception of the gold index which was higher on the back of solid results from Harmony Gold [JSE:HAR].

Although few analysts are prepared to say at this stage that the JSE is due for a correction, more and more of them are beginning to think that the continuing new record levels will be hard to sustain with the price to earnings ratios of some of the big shares that push the JSE higher on unrealistic high levels.

It is particularly true of the platinum sector, where the price earnings ratio of the major platinum producers affected by the prolonged strike in the Rustenburg area are still unbelievably high.

The news that union Amcu again rejected the mining groups' latest wage offer meant that there is no end for the 102-day strike in sight with the prospect of increased violence, but the platinum producers' share prices have reacted very little to the news.

At midday Anglo Platinum [JSE:AMS] was only 0.2% or 100c lower at R501, after opening 300c higher at R504.00 and even reaching a high of R506.20. Impala Platinum [JSE:IMP] was 1.53% weaker at R118,17.

According to the latest Chamber of Mines figure, the strikes have now cost the producers more than R16bn, but Amplats is still trading at a P/E of about 90 times and Implats at more than 30.

The share price of African Bank Investments [JSE:ABL] continued its descent on Tuesday morning, but recovered most of the losses just before midday. The share price has dived by more than 20% since Friday, when the company forecast a loss of more than R3bn on Friday due to increased bad debt write-offs.

The share price initially lost another 1.9% to R9.57c on Tuesday morning but was only 4c or 0.4% lower by midday at R9.80. The share now trades close to its 52-week low of R9.38 and is now almost 60% lower than its 52-week high of R23, reached in May last year.

Despite the sharp drop the share still traded at price earnings of about 19, higher than the average for the market of about 18.

African Bank's troubles have raised concerns about consumers' finances, which pushed the prices of retail shares down. Shoprite [JSE:SHP] traded 0.95% lower at R169.47 and Pick n Pay [JSE:PWK] lost 1.01% to R24.60. Lewis [JSE:LEW] was 0.52% weaker at R60.68.

The gold index improved by 0.41% after the gold price opened stronger on Tuesday morning, but by midday gold traded 0.3% lower at $1 307.

Harmony traded 3.03% higher at R36.68  after the producer said it turned a net profit for the first quarter of the year, compared to a net loss of at the end of 2013, despite a fall in production.

The share price of Grindrod [JSE:GND] reacted very little to the news that the infrastructure group has received the go-ahead from shareholders to raise R4bn in equity funding and at the same time restructure its BEE shareholding. The share price only improved 0.08% to R5.28.

The company plans to spend R10bn on capital expansion projects over the next three years and wants its BEE partners to be aligned at a group rather than operating level.
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Rand - Dollar
18.88
+0.3%
Rand - Pound
23.87
+0.2%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
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