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Johannesburg - Share prices on the JSE were lower on Monday as the local market took a breather after a strong run last week, when the All-share index gained almost 4%.
The biggest losers on Monday were resources shares as a stronger dollar pushed commodity prices down. Fears that the Federal Reserve might still raise interest rates this year have resurfaced after strong economic data from the US, which supported the dollar. Data on Friday showed US consumer prices gained for a fourth straight month in June, while retail sales also rose more than expected.
The Fed said it would keep rates on hold until there is more certainty about the consequences of Britain’s exit from the European Union, but the worst seem to be over now.
By mid-morning the Resources index was already 1.07% down, while some profit-taking after last week’s strong run also pushed the other indices down.
By mid-morning the All-share index was 0.57% softer at 52 787 points and the Top 40 index 0.50% lower at 46 220 points. The Financial index was at that stage 0.44% down and the Industrial index had shed 0.40%. The local market is also waiting for the latest inflation news, which will have an influence on the South African Reserve Bank’s interest rates decision this week, to be announced on Thursday.
The stronger dollar however did not harm the rand as the local currency is still supported by the strong inflow from foreign investors seeking higher yields than the record low yields in developed markets, which are in many cases negative . At midday the rand traded only 0.55% lower at R14.34 to the dollar.
In June this year foreigners were net buyers of South African stock to the value of R63.8bn, the highest ever, and this month the inflow into the equity market was R26.7bn. In the first five months of the year there was a net outflow of R30bn.
The drop in share prices on the JSE was in contrast to foreign markets, where the search for yields and expectations of more monetary support from the central banks of Britain and Japan continued to support share prices.
The sentiment on world markets was also supported by news that Japanese technology giant SoftBank has agreed to buy the British chip maker ARM Holdings for £23.4bn. This was seen by the market as sign of continued confidence in the British economy.
There were however other signs that UK business confidence has taken a serious knock, which strengthens the case for monetary support from the Bank of England at its next meeting. A survey among the financial directors of major companies indicated that more of 84% have postponed investment decisions, and asking prices for houses were also lower than expected last month.
Among the top resources shares BHP Billiton [JSE:BIL] was one of the big losers, trading 2.10% lower at R185.17, while Anglo American [JSE:AGL] was only 1.6% softer at R155.93. Anglo American Platinum [JSE:AMS] lost 0.84% while Kumba [JSE:KIO] lost 2.87% to R130.81. Kumba last week traded at a new 52-week high of R140.50.
In the industrial sector, Naspers [JSE:NPN] traded 0.84% softer at R2 225.13 and Sasol [JSE:SOL] lost 0.46% to R395.75. MTN [JSE:MTN] also lost ground, trading 2.41% lower at R140.25.
Richemont [JSE:CFR], which last week dropped to a 52-week low in reaction to the poor results of Swiss watchmakers, recovered somewhat on Monday morning and traded 0.84% stronger at R84.91.
Barclays Africa [JSE:BGA] and FirstRand [JSE:FSR] were the busiest shares in the financial sector. By mid-morning Barclays Africa was 0.12% higher at R146.17 but FirstRand had lost 0.49% to R46.35.
