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Johannesburg - South African financial markets were in the doldrums on Thursday as emerging markets globally came under pressure. This came as indications that the US would push through fiscal reforms lured investors back to the US markets, supporting the dollar.
The rand was particularly hard hit, with the currency trading as low as R13.61 to the dollar at mid-morning. However, the softer rand did not support share prices as it often does, as emerging markets also took a beating. The local unit was as low as R13.66/$ in early trade.
The losses on the JSE were modest, with the All-share index losing only 0.45%, but the rand is now trading at a four-and-a-half month low against the dollar. The local unit tumbled to its weakest level in more than ten months against the British pound, while it was just shy of its lowest level in a year against the euro. The options market also indicated that the rand could slip even further.
A softer rand is normally good news for resources companies in particular. They are paid in dollar for their commodities, which are worth more if the rand is soft. However, confidence levels are low on the JSE at present due to political uncertainty around the government's struggle to find money to recapitalise struggling state-owned enterprises.
These efforts can have a devastating effect on the budget deficit and the country’s credit rating.
The Resources index was already 0.72% lower at mid-morning and the Industrial index, which includes many dual-listed companies with huge foreign earnings, was 0.33% lower. The Financial index lost 0.39%.
As a result, the All-share index was 0.45% lower at 54 965 points at mid-morning, while the Top 40 index was 0.39% weaker at 48 829 points. Both indices have been drifting lower over the past seven days, shedding about 1.4% in the process.
President Donald Trump on Wednesday proposed lowering corporate and small business income tax rates, reducing the top income tax rate for high-earning American individuals and scrapping some popular tax breaks. He said the tax cuts are aimed at helping working people, creating jobs and making the tax code simpler and fairer.
The plan however prompted criticism that it favours business and the rich, and could add trillions of dollars to the deficit. Analysts said there were few details on how to pay for the tax cuts without expanding the budget deficit.
The top three resources shares on the JSE were all lower. Glencore [JSE:GLN] lost 1.63% to R61.45 and BHP [JSE:BIL] traded 1.32% softer at R236.99. Anglo American [JSE:AGL] slipped 1.07% to R235.64. South32 [JSE:S32], which closed on an all-time high of R43.32 on Wednesday, shed 0.88% to R33.91.
Richemont’s [JSE:CFR] strong performance continued and the big industrial share was 0.39% higher on yet another 52-week high of R121.86. British American Tobacco [JSE:BTI] was 0.86% lower at R844.68.
Naspers [JSE:NPN] lost 0.37% to R2 865.09 after it increased its investment in online food takeaway firm Delivery Hero on Thursday, buying half the stake of e-commerce investor Rocket Internet for €660m. The move takes Naspers’ stake in Delivery Hero to 23.6%.
Steinhoff’s [JSE:SHF] downward spiral continued and the share traded on another 52-week low of R58.84 at mid-morning - almost 1% lower than the previous day. Steinhoff Africa Retail [JSE:SRR] was however 0.47% higher at R21.60.
In the financial sector, FirstRand [JSE:FSR] was 0.77% lower at R51.59 after losing almost 5% over the previous seven days. Other banking shares were barely in the black. Nedbank [JSE:NED] was 0.10% stronger at R201.60 and Barclays Africa [JSE:BGA] gained 0.07% to R136.10.
Capitec [JSE:CPI] lost 1.43% to R866.14, after it announced it would lower interest rates on unsecured lending.
- Fin24 is part of 24.com, a division of Media24, which is a subsidiary of Naspers.
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