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Johannesburg - The strong run in the prices of resource shares, which gained almost 10% over the previous seven days, came to an end on Tuesday morning as investors started to take profits.
That put a damper on the rest of the JSE as the All-share index dropped back to below 50 000 points. The exception was the financial index which was helped by a stronger rand and expectations of higher interest rates globally.
Globally the US dollar held near a 14-year high on Tuesday and US Treasury yields extended their rise as investors braced for stronger inflation in the United States amid expectations of expansionary fiscal policies under Donald Trump's presidency.
Fears that higher bond yields in the US will lead to an outflow of money from emerging markets back to the US where risks are perceived to be smaller, derailed Asian currencies and equities over the past few days.
These markets stabilised somewhat on Tuesday with emerging market currencies beginning to hold their own. The rand also traded 0.77% stronger by mid-morning at R14.21 to the dollar.
By mid-morning the All-share index was 0.29% softer on 49 588 points, while the Top 40 index was at that stage 0.35% lower on 43 313 points.
The stronger rand supported financial shares which are following international banking shares higher. Financial shares on Wall Street have risen 10.8% since the US presidential election on hopes of deregulation and higher interest rates. By mid-morning the financial index was 1.55% higher.
The stronger rand is, however, bad news for resource shares, particularly the dual listed shares, which are worth less if the currency is strong. It also means that these companies earn less in rand for their commodities, which is mainly priced in dollar.
Resource shares also took a breather after a strong run globally on expectations that high spending on infrastructure under a Trump presidency will boost the demand for and prices of commodities. By mid-morning the resources index was already 2.25% down, but gold shares, which lost more than 16% over the previous seven days, regained 4.8% in morning trade.
The industrial index was 0.02% softer due to the stronger rand despite stronger European markets where the big capitalisation shares in the index are also listed.
The top banking shares were sharply higher with Standard Bank [JSE:SBK] 3.08% higher. FirstRand [JSE:FSR] was 2.39% stronger on R48.74. Barclays Africa [JSE;BGA] was 1.74% higher on R146.50.
There was some serious profit taking in the resource sector, where big dual listed shares like Anglo American [JSE:AGL], BHP Billiton ([JSE:BIL] and Glencore (JSE:GLN] all traded on new 52-week highs on Monday.
Glencore, which rose more than 27% over the previous seven days, lost 6.446% to R47.66. BHP Billiton traded 4.87% lower on R227.64 after gaining more than 20% over the previous week. Anglo American’s share price was below R200 again as the share lost 4.78% to R199.77. Anglo gained 15% during the previous week’s rally.
The top industrial shares were moderately lower. Naspers [JSE:NPN] was 0.93% softer on R2 059.00 and Richemont [JSE:CFR] lost 0.33% to R94.05. British American Tobacco [JSE:BTI] was only 0.18% softer on R761.25.
Telkom [JSE:TKG] traded 6.93% higher on R63.79 after the company said first-half earnings rose 20% as it reported a maiden profit for its faster-growing mobile business.
READ: Telkom’s earnings gain on stronger mobile sales
Earnings per share excluding one-time items were R3.36 in the six months through September That was in the middle of a range forecast by Telkom last month. Earnings before interest, taxes, depreciation and amortisation at the mobile unit were R214m, compared with a loss of R37m a year earlier.
