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JSE down on continued emerging market fears

Johannesburg - Emerging stock markets, including the JSE, continued to be on the defensive on Monday morning, undermined by fears that US dollar strength and rising bond yields since Donald Trump's election to president could accelerate fund outflows from emerging markets back to the US.

Resources shares were higher as investors looked for buying opportunities after some losses last week, but the Financial and Industrial indices hardly moved.

The result was that the All-share and Top 40 indices were only moderately higher by mid-morning. At that stage the All-share index traded 0.33% firmer at 50 795 points, while the Top 40 index was 0.31% up at 44 354 points.

The Industrial index was 0.11% lower and the Financial index gained 0.12%.

Earlier in the day, Asian markets were steady to lower and emerging market currencies continued to be under pressure. The rand was however relatively stable and traded 0.53% higher at R14.34 to the dollar.

Goldman Sachs said on Monday that the rand could strengthen next year, as it is one of the emerging market currencies least exposed to protectionist trade policies.

Trump's unexpected election victory has fuelled fears that his economic policies will lead to higher inflation and interest rate hikes in the US, leading investors to rush to buy US stocks and dollars while dumping bonds and emerging market assets.

But more analysts think the current Trump-driven run may have run its course as there is major uncertainty if he could actually implement his proposals.

There will soon be more clarity as differences between the new administration and Congress over some of Trump's policies begin to emerge.

The resources index at mid-morning was already 1.58% higher, after  losing more than 5% over the previous seven days. Although at Monday’s level it is 30% higher for the year, it has hardly moved over the past 90 days. Before Monday’s trade it was 0.15% softer over the period.

The big dual-listed commodity giants were all higher. Glencore [JSE:GLN], which is benefiting the most from the run in the copper price, gained 2.80% to R47.67. BHP Billiton [JSE:BIL] firmed 2.26% to R228.63 and Anglo American [JSE:AGL] traded 2.24% higher to R197.84.

The Industrial index was marginally lower as the FTSE Index in London, where most of the big dual-listed shares are also listed, opened lower too.

Naspers [JSE:NPN], which gained more than 5% since last Wednesday, fell victim to profit-taking and traded 0.50% lower at R2 176.41. The company said on Friday its core headline earnings for the six months to September will be between 25% to 28% higher than the same period the previous year.

Richemont [JSE:CFR] was also slightly lower, losingt 0.17% to R93.65. Steinhoff [JSE:SHF], which is also listed in Frankfurt, gained 0.44% to R71.31.

Sasol [JSE:SOL] was one of the busiest shares on the JSE and gained 1.29% to R372.60. Oil prices rose in early Monday trade after 5% gains last week, their first weekly boost in about a month, on growing expectations that OPEC will find a way to cap production.

There was much interest in the health care sector after Life Healthcare [JSE:LHC] announced on Friday that it is following larger competitors to expand into the UK market. It agreed to buy British diagnostics specialist Alliance Medical Group for as much as £800m, including debt. The latest transaction will increase the portion of revenue generated outside South Africa to 24% from 4%.

The share price however did not respond positively, and the stock traded 1.37% lower at R31.66. On Friday the share lost 3.14%.

South Africa’s second-largest private hospital firm Netcare [JSE:NTC] traded 2.71% stronger at R34.92 despite a 31% drop in full-year profit on Monday, as its operations in Britain weighed on earnings. The results were hit by a non-cash fair value accounting charge related to property leases in the United Kingdom.

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Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
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