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Johannesburg - Investors on the JSE were cautious on Friday morning, despite the successful election in South Africa and a rally on global markets after the Bank of England launched a larger-than-expected post-Brexit stimulus package.
Analysts said investors were taking profits after Thursday’s strong run by financial shares in particular, and the market’s attention is now on the July US non-farm payrolls report due later on Friday.
It will give an important indication of future movements in American interest rates, which can have a huge influence on the local market.
Global stocks were higher on Friday as the Bank of England’s quarter-point rate cut to a record low 0.25% boosted shares, sending already-low bond yields even further south with British yields hitting record lows.
The market was also surprised by additional measures announced to boost the British economy, which seems to be heading for a recession after Britain’s vote to leave the European Union. The Bank of England’s statement that it would take "whatever action is necessary" to achieve stability is seen as indication of more stimulus measures in the pipeline.
Since the bank’s announcement, there have been more indications of the negative influence of Brexit on the British economy. House prices dropped sharply last month and a survey showed the labour market entered into freefall, with the number of permanent jobs placed by recruitment firms last month falling at the fastest pace since May 2009.
The JSE was mostly pulled lower by the big daul-listed shares, most of which are in the industrial sector, although the London market where these shares are also listed was marginally higher by mid-morning.
The exceptionally strong rand, which was still trading at only R13.67 to the dollar on Friday morning - the highest in nine months - also made the big dual-listed shares less attractive as rand hedges. These companies earn most of their income abroad, but a stronger rand means they earn less in rand.
By midday the major indices were only marginally lower, with the All-share index losing 0.19% to 52 433 points and the Top 40 index trading 0.23% lower at 45 426 points. The Financial index was 0.35% softer and the Industrial index at that stage was already 0.55% lower.
Resources shares were higher on a slightly weaker dollar and an overnight rally in the oil price, following a moderate drop in oil stockpiles. By mid-morning the Resources index was 1.1% higher and the Gold index had gained 0.72%.
Among the top shares on the JSE, Naspers [JSE:NPN] traded 0.24% down at R2 130.02 and SABMiller [JSE:SAB] lost 0.31% to R783.06. Richemont ]JSE:CFR] shed 0.48% to a new 52-week low of R80.46. The share fell 10.7% over the last 30 days and 17.5% over the last 90 days on concerns about poor demand for luxury goods.
MTN [JSE:MTN] lost 3.78% to R128.50 after the company announced a loss of R4.9bn for the first half of the year, following the hefty regulatory fine in Nigeria and underperformance in its South African home market.
MTN cut its dividend by almost 50% to 250 cents per share for the half-year. Before Friday’s trade the share price lost 9.28% over the past 30 days.
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