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JSE dips on mini budget let-down

Johannesburg - Disappointment over the mini budget pushed share prices lower on Thursday morning, but the losses were exacerbated by more bad news from abroad about the Chinese economy, the strong dollar and lower European markets.

Although Finance Minister Pravin Gordhan promised in his medium-term budget speech on Wednesday to cut state spending further, economists are worried about the lack of measures to improve the country’s growth prospects, which look very bleak at the moment.

Poor economic growth will not only heighten the possibility of a downgrade of South Africa’s credit rating next month, but also presents challenges to Treasury as it would need to balance the state’s books with less tax income.

Growth prospects were also hit by disappointing news from China, as that country is the biggest market for South Africa’s commodity exports. Resources shares were the hardest hit and the Resource 10 index was already 1.27% lower by mid-morning on Thursday. The gold index was 2.92% down on the back of a weaker gold price.

Although the rand lost more than 1.3% on Thursday in reaction the mini budget to trade at R13.97 to the dollar, it did not benefit the big dual-listed shares in resources and industrial indices. The Industrial index was 0.64% down, following the FTSE index in London lower.

As a result, the All-share index was already 0.79% softer by mid-morning on Thursday at 51 143 points, while the Top 40 index lost 0.87% to 44 621 points. The Financial index shed 0.89%.

Investor confidence in China's economic recovery was shaken by fresh data showing profits in China's industrial firms grew 7.7% in September, slowing sharply from the previous month's 19.5%.

Profits in industries such as electronics, steel and electricity were hit by a significant drop in growth, reinforcing suspicions that recent economic stability was the result of government stimulus and could be short-lived.

The top dual-listed resources shares were all lower, including Anglo American [JSE:AGL] and Glencore [JSE:GLN], which traded at 52-week highs the day before. Anglo lost 0.51% to R184.73 and Glencore was 0.61% lower at R40.71. BHP Billiton [JSE:BIL] lost 1.67% to R207.34.

Naspers [JSE:NPN] traded 0.57% softer at R2 337.00 and Steinhoff [JSE:SHF] lost 0.51% to R75.80. Richemont [JSE:CFR], which has a huge interest in the Chinese economy, was 1.38% weaker at R90.86. Sasol [JSE:SOL] was 1.13% softer at R388.22 on diminishing prospects for a production cut by the Opec countries.

British American Tobacco [JSE:BTI], which reached a 52-week high on Wednesday, was stable and traded 0.04% higher at R781.15.

In the financial sector, Standard Bank [JSE:SBK] lost 1.54% to trade at R139.56 and FirstRand [JSE:FSR] was 1.64% softer at R46.17. Old Mutual [JSE:OML], which is also listed in London, shed 0.41% to R33.78.

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Rand - Dollar
18.88
+0.3%
Rand - Pound
23.85
+0.2%
Rand - Euro
20.37
+0.3%
Rand - Aus dollar
12.31
+0.3%
Rand - Yen
0.12
+0.3%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
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