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Johannesburg - Growing confidence that the US will raise interest rates next month boosted the dollar on Monday, with negative implications for commodities and resources shares.
By midday on Monday all major indices on the JSE were down, with the Resources and Gold indices the biggest losers and some of the biggest commodity shares again back on new 52-week lows.
The prospect of the first increase for almost a decade boosted the greenback, but dragged down the prices for raw materials and energy as the stronger dollar made them more expensive for international investors.
Oil prices dipped, copper broke below $4 500 a ton for the first time since 2009, nickel hit a 12-year low and gold fell for a second day.
The expectations of a US rate hike in December received a boost over the weekend when the president of the Federal Reserve in San Francisco said there was a "strong case" for an increase in December.
Emerging market currencies fell against the dollar on Monday, with Bloomberg's benchmark gauge of the units heading for its first drop in five days. The rand was back above R14.00 a dollar and traded at $14.05 to the American currency.
READ: Rand under pressure as market eyes US rate hike
The market did however recover quite strongly towards midday and shed a major part of the morning’s losses. The two top indices were both almost 1% lower at one stage, but at midday on Monday the All-share index was only 0.28% softer at 52 093 points. The Top 40 index traded 0.33% lower at 46 807 points. The biggest drop was in the resources sector which was 3.64% down by midday, while the Gold index lost 3.52%.
Financial and banking shares lost almost 1% in early trade but were only 0.38% down by midday. The shares made a strong run last week on the back of the stronger rand. The Industrial index gained 0.22%.
The two biggest commodity shares on the JSE, BHP Billiton [JSE:BIL] and Anglo American [JSE:AGL], both reached new 52-week lows. BHP Billiton lost 3.74% to R193.75 and at midday Anglo American was 5.01% weaker on a new low of R92.25. The share price was at one stage as low as R90.61%, more than 7% down on Friday’s close.
Kumba Iron Ore [JSE:KIO] lost 3.05 to R44.11 and South 32 [JSE:S32], the commodity producer which was spun off from BHP Billiton earlier this year, also reached a new low of R12.42 after losing 5.91% in morning trade.
Platinum shares also lost ground as the platinum price shed another 0.73% to trade at $848.21. Anglo American Platinum [JSE:AMS] was 2.05% lower at R205.05 and Impala Platinum [JSE:IMP] lost 3.37% to R31.50.
Lonmin [JSE:LON] was by far the busiest share on the JSE, with more than 9 million shares trading for only R2.8m. The share price also lost 6.9% to 27c.
Lonmin’s share price dropped more than 86% on Friday to only 29c, from R2.09 at Thursday's close. The sharp drop was however not only the result of selling pressure, but the dilution effect of the planned rights offer. Lonmin plans to raise $407m by offering more than 26 billion shares at a discount of more than 94%.
The company offers 46 new shares for every existing one, and the new shares were listed on Friday at the issue price of 1 pence in London or 21.15c on the JSE.
That means that for every existing share, which was still worth R2.09 on Thursday, 46 new ones were listed on Friday at the issue price of only 21.5c, which diluted the share price to only 29c at the close.
Investors who decided to sell and not take up 46 additional shares in the rights offer therefore lost 85% of what remained of their investment on Friday. Investors will have to fork out an additional R9.74 for the 46 additional shares to prevent the dilution effect from destroying what they had before the rights offer.
It seems some investors prefer to take their losses as there were 341 transactions in the share on Monday morning.
Among the top shares in the industrial sector, Naspers [JSE:NPN] gained 2.07% to R2 209.72. SABMiller [JSE:SAB] was however 0.54% lower at R851.25 and Richemont [JSE:CFR] 0.92% at R105.95.
