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Johannesburg - On Wednesday financial shares started the day’s trading on the JSE sharply lower as investors in the financial sector begin to discount the possibility that Pravin Gordhan might soon be replaced as minister of finance.
Financial institutions will be the most affected by the fall-out of such a development, and shortly after the market’s opening some of the top banking shares were more than 4% lower.
The Financial index was at stage more than 2% lower, but the market recovered somewhat and at mid-morning the index was only 1.62% lower.
Resources and industrial shares were again moderately supported by the weaker rand, which dropped to R13.11 before it also recovered somewhat to R13.06 to the dollar. By mid-morning the Resources index was 1.16% higher while the Industrial index gained a modest 0.21%.
The result was that the All-share index dropped 0.05% to 52 283 points at mid-morning and the Top 40 index, which includes most of the dual-listed shares which benefit the most from a softer rand, traded 0.14% higher at 45 279 points.
The uncertainty about Gordhan’s future, and that of South Africa, continued on Wednesday amid reports that President Jacob Zuma wants to fire Gordhan, but does not have the support of top ANC executives for such a move.
The softer rand is not good for financial shares, and investors are concerned about the negative influence on the financial sector of fall-out such as higher interest rates and a possible downgrading of South Africa’s credit rating, if Zuma continues with his rumoured plan of action.
FirstRand [JSE:FSR] and Standard Bank [JSE:SBK], the most widely trading banking shares, were more than 4% lower in early trade.
FirstRand was one of the busiest shares on the JSE with more than seven million shares being sold by mid-morning. At that stage the share price was 3.68% down at R48.36 after trading as low as R47.86, a loss of almost 5% on the previous day. FirstRand’s holding company Rand Merchant Bank Holdings [JSE:RMH] lost 3.36% to R60.64.
Standard Bank [JSE:SBK] was at that stage 2.60% lower at R151.29 after earlier dropping as low as R147.13. Nedbank [JSE:NED] shed 1.61% to R252.38.
Barclays Africa [JSE:BGA] lost 1.20% to R148.87. The share is still reeling from news that the banking group sold less than half its target in a bond auction. Barclays Africa offered R1.5bn ($113m) of notes earlier this month but raised only R642m.
Analysts said this is due to the fact that African banks have already raised R17.1bn of debt this year, more than double the R7.8 bn in the comparable period last year, to comply with stricter capital requirements. Investors are also concerned about the pending sale of London-based Barclays’ remaining stake in Barclays Africa.
Capitec [JSE:CPI] traded 1.46% softer at R795.25 despite announcing an 18% rise in headline earnings this week. The bank also said it hopes its acquisition of Creamfinance, a European online lending firm, will eventually lead the establishment of a digital-only bank overseas.
MMI Holdings [JSE:MMI] was the biggest loser among the major insurance companies, shedding 3.43% to R24.20. Sanlam [JSE:SLM] was 1.94% softer at R68.15 and Old Mutual [JSE:OML] lost 0.86% to R34.70. Old Mutual sold more than seven million shares.
The big shares in the Industrial index again traded higher. Naspers [JSE:NPN] was 1.84% stronger at R2 348.48 and Steinhoff [JSE:SHF] gained 1.34% to R64.50; Richemont [JSE:CFR] was 1.01% higher at R102.30.
Resources shares were higher for the second day on the back of the weaker rand. BHP Billiton [JSE:BIL] gained 2.03% to R202.24 and Anglo American [JSE:AGL] traded 1.17% stronger at R198.80.
