Johannesburg - The rebound in the oil price did not last long and that blew the recovery on world markets out of the window on Tuesday, including the JSE.
Major indices on the JSE were at one stage 1% lower after another rout on world markets, as the oil price rally came to an abrupt end and the price again dropped to below $30 a barrel. The fall in share prices started on Monday afternoon on Wall Street and continued on Tuesday in Asia and Europe, with substantial losses.
The only exception on the JSE was the Gold index, which gained more than 8% on Tuesday and is now very near a 52-week high. At midday the index stood at 1 529 points, twice as high as the 52-week low of 753 reached in August this year.
Gold is regarded as a safe haven in times of financial turmoil, but gold shares are not only supported by a higher gold price, but also by the weaker rand which means gold mines received much more in rand for their product.
READ: Gold surges as turmoil skewers rate outlook
The other indices recovered later in the morning and at midday the All-share index was only 0.40% down at 47 024 points after being as low as 46 582 in earlier trade. The Top 40 index dropped to 41 727 points before recovering to 42 262 points, 0.59% lower than the previous day.
The Financial index was again the biggest loser, trading 1.63% lower. Stocks were hit by a somewhat softer rand, while investors are also concerned about this week’s monetary policy committee meeting which will probably announce an interest rate hike of as much as 1%, which will have a further detrimental effect on the South African economy.
Investors in financial shares are also waiting for the outcome of the Federal Reserve’s meeting this week to see what the future holds for US interest rates.
The Industrial index was 0.21% down and the Resources index recovered some of Monday’s losses, trading 0.08% higher.
The rand weakened in early trade on Tuesday as an oil price plunge swang global markets away from riskier assets in emerging markets. By midday the rand traded at R16.61 to the dollar.
The oil price dropped to below $30 a barrel on news that Iran’s oil production reached new record levels, sparking fears of a glut in an already overstocked international market.
Most of the attention however focused on the Gold index, which gained 8.74% to trade at 1 529 points, not far from the 52-week high of 1 583 points reached in February last year. That means gold shares have doubled in value over the past six months and gained more than 50% since the beginning of the year.
Some of the top shares made spectacular gains on Tuesday morning. By midday DRDGold [JSE:DRD] traded 13.65% higher at R4.83 and Gold Fields [JSE:GFI] had gained 10.58% to R57.28.
Harmony [JSE:HAR] was another 9.32% higher at R32.31 and AngloGold Ashanti [JSE:ANG] was 8.72% stronger on a new 52-week high of R146.67. Sibanye Gold [JSE:SGL] also reached another 52-week high when the share price gained 6.60% to R37.61.
Harmony is by far the most spectacular performer, with a 115.3% jump in the share price in the past 30 days before Tuesday’s trade. DRDGold gained 86.4% over the same period. Sibanye, the biggest producer of gold in South Africa, is 46.15% higher over the past month, but gained 103.9% over the past 90 days.
Neal Froneman, chief executive of Sibanye, said recently the group’s profit margins doubled in the past six weeks as the rand plunged against the dollar.
Gold priced in the South African currency has surged 19% to R587 000 ($35 023) a kilogram since December 1, while in the US currency the metal’s price has increased by just more than 3% to $1 113/oz. Since Sibanye earns its revenue in dollars and its costs are in rand, the move in currencies has boosted its profit margins.
The rand has weakened 31% against the dollar since the start of 2015 as commodity prices fell amid slowing growth in China, South Africa’s biggest trading partner.
FirstRand [JSE:FSR] and Old Mutual [JSE:OML] were the busiest shares in the financial sector and both traded lower. FirstRand lost 0.96% to R40.24 and Old Mutual was 1.2% lower at R35.98.
Among the industrial shares Richemont [JSE:CFR] traded 0.58% higher at R103.56.
Anglo American [JSE:AGL] got off to a weak start and traded as low as R50.74 before it recovered. At midday the share was 4.71% higher at R56.74.