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Port Elizabeth - The share prices of a handful of the largest companies on the JSE held their ground last week and prevented JSE indices from falling sharply for the third week running.
SAB Miller [JSE:SAB], Steinhoff International [JSE:SHF], Bidvest [JSE:BVT], Richemont [JSE:RCH], BHP Billiton [JSE:BIL], Naspers [JSE:NPN] and MTN Group [JSE:MTN] were just about the only large capitalisation shares that increased enough during the week to counter quite large losses in the prices of just about all the other shares on the JSE.
Sasol [JSE:SOL] continued to decline as the rand held steady and the oil price declined to below $70 per barrel. The reason is that Sasol sells its SA manufactured fuel for the equivalent of international petrol prices and make much less profit when petrol prices fall.
Nevertheless, the share is getting cheap on a price to earnings ratio of only 7.2 times. After all, we all know the oil price is not going back to $9 and the rand is not heading to R2 per dollar.
Mining shares also felt the brunt of the current negative sentiment towards commodities and continued to decline.
African Rainbow Minerals [JSE:ARM] ended the week nearly 10% lower and Assore [JSE:ASR] dropped nearly 13%. Durban Deep [JSE:DRD] fell more than 12%, but Gold Fields [JSE:GFI] and Harmony Gold [JSE:HAR] picked up a bit.
One can only pity speculators that entered the market on the long side using derivatives like single stock futures or contracts for difference where gearing would have translated these 10% losses to some 80% and more.
Most industrial shares were also feeling head winds as local economic data indicates still further decline in economic activity.
If SA mining companies feel the pinch from lower export volumes and lower prices, the rand is bound to become vulnerable which will increase prices of all the nice imported goodies we like so much.
In addition, the mining industry is still a very big employer in SA and continued pressure on profitability puts pressure on employment in the sector.
The trading update from Anglo American Platinum [JSE:AMS] during the week would have done little to improve sentiment. Amplats announced that headline earnings for the year to December is bound to be about 80% lower than in the previous year, mostly due to the long strike at the beginning of the year.
Lack of enough electricity to keep production in the economy going and lower consumer confidence will also have an effect on the market. Lower confidence could be seen by the lacklustre performance of new vehicle sales, which increase by less than half a percent in November.
The week ahead
The SA Reserve Bank’s quarterly bulletin will be published this week and will make for interesting reading. The bank’s economists steer clear of making too many forecasts or suggest solutions to known problems, but hopefully their respected views will trigger somebody somewhere to jump into action.
Stats SA will release retail sales figures for October and FNB will announce the results of their regular consumer confidence survey to add some new data to the scenario sketched in the SARB’s quarterly analysis.
Stats SA is also due to announce its latest employment figures and consumer inflation within the next week or so to complete the picture.
But, most of all, more international credit rating agencies will get into SA’s fortunes this week. Both Fitch and Standard & Poor’s will announce the outcome of their latest analysis of SA’s creditworthiness.
It does not look as if the JSE will increase by 20% this week.
