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Johannesburg - Investors in South African gold shares received an unexpected bonanza from the country’s political turmoil, which culminated in Standard and Poor’s decision on Monday to downgrade South Africa’s credit rating to junk status.
READ: Rand keeps falling as Moody's places SA on downgrade review
With the rand dropping sharply on the news of the downgrade, gold shares were again the top performer on the JSE on Tuesday morning, on the back of a stronger rand gold price. Some of the top gold shares gained more than 8%.
The top banks however again lost ground, although the losses were not big as last Friday when the news of President Jacob Zuma’s Cabinet reshuffle plunged the country into political turmoil.
At mid-morning the Gold index was already 7.1% higher at 1 527 points, which means the index is now more than 13% higher than the close of 1 308 last Thursday before Zuma's late night Cabinet reshuffle.
The strong run in gold shares is mainly due to the higher rand gold price, resulting from a weaker local currency which at mid-morning traded at R13.88 to the dollar, compared to R12.46 two weeks ago. The mid-morning gold price of R17 417 per ounce is also more than 13% stronger than the R16 092/oz closing price before the reshuffle. The dollar price of gold gained only $4 over that period.
Resources shares also benefited strongly from the weaker rand as they receive more in rand for their products; at mid-morning the index was 2.68% higher after gaining more than 7.8% over the previous seven days.
The result was that the All-share index was already 0.71% higher at mid-morning at 52 828 points, while the Top 40 index traded 0.88% stronger at 45 960 points. The major indices also received support from the Industrial index, which traded 1.12% higher as investors bought dual-listed shares which become cheaper when the value of the rand drops.
Among the financial shares, Nedbank [JSE:NED] was the biggest loser, shedding 2.26% to R231.50; FirstRand [JSE:FSR] was only 0.60% lower and Standard Bank [JSE:SBK] lost 1.14%.
The Financial index is now almost 7% down over the past seven days, and most of the major banks are about 12% lower over the same period.
READ: Banks lose R61bn on Gordhan ouster, S&P downgrade
The top gold shares were all decisively higher, with Sibanye [JSE:SGL] 7.94% stronger at R33.17. AngloGold Ashanti [JSE:ANG] gained 7.57% to R160.50, and Gold Fields [JSE:GFI] traded 6.55% higher at R51.09. DRDGold [JSE:DRD] gained 6.06% to R7.00.
Harmony Gold [JSE:HAR] was only 5.41% stronger at R35.85 but the share price already gained more than 15% over the previous seven days. Sibanye added more than 11% to its market value over the seven days.
Some of the top resources shares are now trading at 52-week highs, including Exxaro [JSE:EXX] which gained 5.72% to R127.15. Before Tuesday’s jump the share was already 14.6% higher over the previous 30 days.
Sappi [JSE:SAP], which gained more than 13% over the past month, set yet another 52-week high by trading 1.29% up to a new high of R94.71. Its major competitor Mondi [JSE:MNP] gained 1.09% to reach a new 52-week high of R333.97.
South32 [JSE:S32], which was unbundled last year from BHP Billiton, at mid-morning was already 5.14% higher on a new high of R30.49, after gaining more than 12% over the previous 30 days.
BHP Billiton [JSE:BIL] was 1.85% higher at R211.38 and Anglo American [JSE:AGL] gained 1.54% to R207.14. Glencore [JSE:GLN] lifted 2.52% to R54.20, with the stock now approaching the 52-week high of R55.17.
Richemont [JSE:CFR] rose to a 52-week high of R198.51 in the industrial sector, after trading at R87.89 as recently as January 4 this year. The share is now more than 25% higher than six months ago.
Steinhoff [JSE:SNH] was the busiest share on the JSE, with more than 12 million shares traded and the share price gaining 1.22% to R64.58. Naspers [JSE:NPN] was 2.21% stronger at R2 401.90.
