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Johannesburg - Financial shares, which have been recovering some of the losses of the recent past, were the star performers on the JSE on Tuesday morning.
The strong rally of the past few days on global markets continued on Tuesday, but investors on the JSE were not nearly as exuberant as their international counterparts.
At mid-morning the Financial index was more than 1.5% higher, but the other major indices were only marginally in the black with resources and gold losing ground.
With the rand trading at R14.30 to the dollar, almost 1% higher than the previous day and the strongest since April this year, some of the rand hedges driving the local market lately could have become less attractive. Financial shares are however supported by a strong rand.
By mid-morning the Financial index was trading 1.61% higher, but the All-share index was only 0.29% up at 52 323 points and the Top 40 index traded only 0.35% stronger at 45 848 points. At that stage, the Industrial index - which includes most of the big dual-listed shares - had gained only 0.19%. The Resources index was 0.44% softer and gold 1.95% lower.
Before Tuesday’s trading the All-share index was still 0.36% lower over the past seven days and 4.23% softer over the previous 30 days, which meant that the bourse did not recover its losses since Britain’s decision to leave the European Union sent markets into a tailspin.
This in sharp contrast with world markets, where the S&P 500 Index on Wall Street reached a new record on Monday, Asian markets traded at the highest level in two-and-a-half months on Tuesday and European markets were heading for the highest level since Brexit.
The exuberance on international stock markets is still fuelled by the low yields on government debt, as investors expect financial authorities to drop record low interest rates even further to boost economic growth to protect the global economy against a possible Brexit fall-out.
Global investors are buying high-dividend and defensive shares, seeking refuge from low or negative interest rates in Europe and Japan.
Analysts are however concerned about the sustainability of the current rally. "The rally is not so much supported by economic fundamentals as liquidity, which is likely to be short-lived," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
Investec [JSE:INL], one of two dual-listed financial shares on the JSE, gained 2.99% on Tuesday to trade at R87.99 to make up some of its losses since Brexit. Before Tuesday’s trade the share was still 5.19% softer over the past seven days and 22.08% over the past 30 days.
Old Mutual [JSE:OML], which is also listed in London, was 2.15% higher at R38.67. It has also not made up all of its losses since Brexit and is still 3.28% lower than a week ago and 7.25% softer than a month ago.
Sanlam [JSE:SLM], which lost 6.68% over the past month, regained 2.04% on Tuesday to trade at R61.47.
In the banking sector FirstRand [JSE:FSR] gained 2.21% to R46.25. It is one of the few financial shares which regained all its Brexit losses and before Tuesday’s trade was 4.63% higher over the past month. Barclays Africa [JSE:BGA], which is still more than 4% softer over the past 30 days, at mid-morning was 1.22% higher at R141.71.
Resources shares were a mixed bag with Anglo American [JSE:AGL] 1.13% higher at R152.65, but BHP Billiton [JSE:BIL] lost 0.16% to R186.76. Glencore [JSE:GLN], which gained almost 10% over the previous seven days, traded 3.88% firmer at R34.35.
One of the biggest losers was Anglo American Platinum (Amplats) [JSE:AMS], which lost 3.88% to R381.55 after it said first-half profit probably fell by 50% to 70%.
READ: Amplats sees profit drop of up to 70%
Amplats gained 118.76% over the past six months on the back of a higher platinum price, but the world’s biggest platinum producer said headline earnings for the six months to end-June probably dropped to a range of R745m and R1.24bn from R2.47bn a year earlier, after last year's inventory gains weren’t repeated and the dollar price of the commodities it mines declined.
