Johannesburg - Share prices on the JSE have been consolidating on Wednesday morning after the volatility of the previous day.
By mid-morning the All-share index was again 0.75% higher at 49 756 points, while the Top 40 index traded 0.88% stronger at 44 338 points.
The Gold index was the only major index that was substantially lower, as the Financial index recovered almost all of its earlier losses and was only 0.08% down. The Gold index lost another 1.50%.
The Industrial index was 0.83% higher and the Resources index resumed its upward trend after Monday’s volatility, which saw big swings in the prices of resources shares. By mid-morning the Resources index was 1.69% stronger.
The JSE opened stronger on Tuesday morning and around midmorning the All-share index exceeded 50 000 points for the first time this year. However, the mood changed and the index ended the day almost 1% lower.
One of the reasons for the big swings was the news that Anglo American [JSE:AGL] announced that it would sell all its assets except for those producing diamonds, copper and platinum. Anglo’s share price, which was more than 7% higher in the morning, dropped more than 15% from that level before it stabilised and closed only 0.37% lower at R88.96.
The volatility was also due to news that the group’s credit rating was cut to junk by Moody’s Investors Service, as slumping commodity prices inhibit the London-based miner’s efforts to reduce debt and sell assets. The company also announced a 55% drop in earnings.
This news was however shrugged off by the market on Wednesday and by mid-morning Anglo American traded 2.55% higher at R91.23. This means that the share, which reached a 52-week low of only R53.30 in January, gained more than 45% over the past 30 days.
One of the companies Anglo American wants to sell is Kumba Iron Ore [JSE:KIO], owner of the Sishen mine in the Northern Cape, and the market seems to like that idea. Kumba traded 7.43% higher on Tuesday on a three-month high of R58, and on Wednesday morning the share price was another 12.07% higher at R65.00.
The share price has been rallying for the past month and is now 70.5% higher over the past 30 days, as it is regarded as extremely oversold. In less than a year it dropped from a 52-week high of R231.50 to only R25.35 before the recovery started.
BHP Billiton [JSE:BIL] was 1.93 higher at R157.82 and Glencore [JSE:GLN] was 4.3% up at R24.45.
Analysts said Tuesday’s uncertainty was due in part to investors taking profits after the strong run of the previous few days. That was also the case in Asia on Wednesday morning, where markets were lower despite a strong run on Wall Street on Tuesday evening.
Attention will focus on the oil price in the next few days as the world waits to see if the major oil producers can reach a deal to cut production levels to end the current glut. The oil price is an important indicator of what will happen in the markets.
Saudi Arabia and Russia agreed to keep production at January levels, but analysts said the two countries produced so much in that month that it would barely dent stockpiles. The deal is also dependent on other producers joining the agreement, particularly Iran which is keen to increase production now that sanctions against the country are lifted.
Brent crude dropped to $31 per barrel on Wednesday after trading as high as $35 per barrel earlier in the week, indicating scepticism in the market. Sasol [JSE:SOL], the biggest energy company on the JSE, traded only 0.67% higher at R431.39.
Insurers were among the biggest losers in the financial sector, with Discovery [JSE:DSY] losing 5.17% to R115.50. The company, which in September unveiled plans to launch a retail bank, said last week it expects the process of obtaining a banking licence to take at least another two years.
Discovery said that it will not buy Absa should Barclays opt to sell all or some of its stake in Barclays Africa Group [JSE:BGA], as the company seems set on obtaining its own licence and not buying a smaller local bank.
Rand Merchant Insurance Holdings [JSE:RMI] was also one of the busiest shares on the JSE and traded 1.10% lower at R39.60 after reaching R38.11 in earlier trade.