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Johannesburg - Resources shares retreated strongly on the JSE on Thursday after the Federal Reserve signalled on Wednesday it may lift interest rates at its next policy meeting in December, reigniting fears that the move would trigger capital outflows from emerging markets.
Any possibility of higher interest rates in the US is good news for the dollar, with serious consequences for the currencies of emerging markets and the prices of commodities. The dollar reached a two and a half month high against a basket of currencies on Thursday.
“Emerging market currencies will once again bear the brunt of investor sentiment and the rand will not be left untouched,” Standard Bank chief trader Warrick Butler told Reuters.
It was therefore no surprise that the rand traded sharply lower against the dollar, while the Resources sector lost more than 3% of its value. The Gold index was at midday on Thursday more than 5% lower.
The All Share-index was lower for the fourth consecutive day and traded 1.06% lower on 53 184 points. The index is now almost 1 000 points (or 2%) lower than Friday’s close.
The Top 40-index lost 1% to 47 708 points. Imara SP Reid said in its daily market snapshot that a level between 47 000 and 47 200 points is a realistic near term target for the index.
“The Top 40-index remains overbought and near term rate of change data continues to suggest that 'chasing the market' at current levels will not be well rewarded in the near term.”
All the other major indices were also down with the Resources index losing 3.61%, the Gold index 5.44% and the Financial index 1.32%. The Industrial index was steady and lost only 0.25%.
Gold shares were the biggest losers and Sibanye [JSE:SGL] lost 9.02% to R22.80 after the company said that its earnings for the year to December will be more than 20% weaker than the previous year. This loss came after the share price gained 44.86% over the past 30 days.
Harmony [JSE:HAR] lost 5.99% to R10.20 and Gold Fields [JSE:GFI] was 5.47% softer on R37.52.
Some of the big commodity shares on the JSE traded at new 52-week lows. Kumba Iron Ore [JSE:KIO] lost 8.61% in early morning trade and by midday was at a new low of R57.51. The share price lost 21.5% of its value over the past seven days and is now 60.28% lower than 90 days ago.
The last few days were also not good for Anglo American [JSE:AGL] which lost 10% of its value over the past seven days before today. The share price shed another 2.67% on Thursday to trade at a new 52-week low of R115.31.
Impala Platinum [JSE:IMP] was also at a new low of R28.27 after losing another 2.27% and ArcelorMittal [JSE:ACL] lost 1.7% to reach a new low of only R8.25.
MTN [JSE:MTN] recovered somewhat on Thursday after losing almost 15% of its value over the previous three days in response to news that it was fined R71bn by the Nigerian communication authorities.
The share price, which closed on a 52-week low of R155.85 on Wednesday, gained 0.56% on Thursday and by midday traded at R156.77.
Shoprite [JSE:SHP] was also at a new 52-week low after the share price lost 0.99% to R146.34.
