JSE in limbo as SABMiller departs All-share index

Johannesburg - The JSE was in limbo on Monday morning, despite an improvement in risk appetite on global markets from reports Deutsche Bank was negotiating a much smaller fine with the US Department of Justice.

Asian markets started higher on Monday morning and the FTSE index in London hit the highest level since June 2015, but not even the dual-listed shares on the JSE responded much.

The result was that JSE's All-share index was 0.15% lower by mid-morning at 51 782 points, while the Top 40 index traded 0.25% down at 45 312 points. All the major indices were lower, but the losses were modest. The Industrial index, with all the big dual-listed shares, shed 0.36%, the Financial index was 0.20% softer and the Resources index lost 0.04%.          

The stronger rand could have contributed to the lacklustre atmosphere on the market, as it means the dual-listed shares are worth less in the local unit.

The rand, which lost ground on Friday due to a bigger than expected trade deficit, recovered 1.74% against the dollar to R13.65 and strengthened 2.56% against the pound to R17.54.

At one stage on Monday morning the pound fell to its lowest level since mid-August, after British Prime Minister Theresa May said she would trigger the process for the UK to leave the European Union by the end of March in 2017.

Global markets, including the JSE, were under pressure last week on concerns about the health of Deutsche Bank, one of the world’s biggest banks, as it faces a fine of more than $14bn from US authorities for miss-sold home loan securities.

The International Monetary Fund said Deutche Bank’s woes are a bigger potential risk to the wider financial system than troubles at any other global bank, as it has significant trading relationships with all of the world's largest finance houses.

A media report late on Friday claimed Deutsche Bank and the US Department of Justice were close to agreeing a settlement of $5.4bn, rather than the initially touted $14bn. That report has still not been confirmed. Deutsche Bank’s shares gained more than 6% in Frankfurt on Monday morning.

Although sterling was under pressure, the FTSE 100 index on the London Stock Exchange benefited from news on the timing of the Brexit process. The index fell sharply after Britain voted to leave the European Union on June 24 but has since recovered and is up nearly 10%, thanks to the large number of listed firms with international exposure which have benefited from a fall in sterling.

Most of the big capitalisation shares on the JSE did not move much, as investors who are tracking the indices are still rebalancing their portfolios after SABMiller [JSE:SAB] left the All-share index on Thursday, when it was taken over by Anheuser Busch InBev (AB InBev) [JSE:ANB].

AB InBev is not part of the All-share index as its local shareholding is not big enough, while Impala Platinum [JSE:IMP], which replaced SABMiller in the index, is much smaller than SABMiller. This means the weight of shares like Naspers [JSE:NPN] and Richemont [JSE:CFR] in the index have increased significantly.

Naspers was however 0.35% lower at R2 366.90. The share price gained only 1.7% over the last seven days before Monday’s trade. Richemont, which also hardly moved over the previous seven days, was 0.24% lower at R83.12. Steinhoff [JSE:SHF] was 0.34% higher at R78.82.

Aspen [JSE:APN] continued to be one of the busiest shares on the JSE and the stock gained 1.35% to R314.20, after losing 3.73% over the previous seven days and 14.7% over the previous 30 days. GlaxoSmithKline announced last week that it is selling the final portion of its stake in the South African company for about $619m.

MTN [JSE:MTN] was the busiest share on the JSE in terms of volume, and at one stage lost more than 1.5% to R144.72 before recovering somewhat. By mid-morning it traded 0.74% lower at R116.59 in reaction to the news that rating agency Standard and Poor's had lowered the group’s credit rating amid Nigeria’s recent downgrade.

Anglo American [JSE:AGL] was again a strong performer in the resources sector, gaining 1.85% to another 52-week high of R174.58. The share, which is already more than 164% higher for the year to date, gained 5.2% over the previous seven days and 15.58% over the previous 30 days.

Capitec [JSE:CPI] was one of the best performers in the financial sector, after it gained 1.12% in morning trade to reach a new 52-week high of R649.56. The share is already 21.62% higher for the year to date.