Johannesburg - The JSE lost further ground on Friday morning after a reversal in the oil price rally also put an end to the global stock market recovery.
Local shares were not only hit by global sentiment, but investors were also concerned about domestic economic issues with another downgrade of the country’s credit rating looming large before next week’s crucial budget speech.
The strong rand, which is currently at its firmest level since late December, is also not good news for dual-listed shares which earn most of their income abroad, or commodity companies which earn their income in dollar.
One of these companies is MTN [JSE:MTN], whose share price tumbled by more than 15% on Friday morning after the group announced its latest full-year earnings will be 20% weaker than the previous year.
By mid-morning, the All-share index - which was solidly above 50 000 points early on Thursday morning before the market turned around - lost another 1.18% to trade at 49 270 points. The Top 40 index was at that stage 1.41% softer at 43 834 points. The biggest loser was the Financial index, which shed 1.7% due to profit-taking after a strong rally in banking shares backed by the firmer rand.
The Industrial index, which is heavily loaded with shares regarded as rand hedges, was at that stage already 1.54% softer.
The Resources index barely moved and was only 0.01% softer in mid-morning trade, but gold rallied strongly despite the rand recovery and was 6.98% higher.
Gold Fields [JSE:GFI], which lost more than 14% on Thursday after announcing a headline loss in the fourth quarter, recovered most of these losses and traded 8.57% higher at R60.79. AngloGold Ashanti [JSE:ANG] was 6.86% stronger at R169.09.
On Thursday the rand traded at its strongest overnight level this year of $15.25, recouping all its losses and more. Some of these gains were however lost on Friday morning and by mid-morning the currency traded at R15.41 to the dollar.
Analysts said receding fears of a global economic downturn boosted risk appetite for the currencies of emerging markets and the rand has been the second-best emerging market unit over the past five days, appreciating 2.96% against the dollar.
Expectations of further local interest rate hikes after this week’s sharp rise in the local inflation rate also boosted the rand, as this would encourage capital inflows.
The stronger rand helped banking shares recoup all losses suffered due to the Nenegate fiasco, but on Friday morning banking shares gave up some of those gains. FirstRand [JSE:FSR] traded 2.19% softer at R46.53 and Barclays Group Africa [JSE:BGA], the star performer on Thursday, traded 2.44% down at R153.60.
Most of the attention was however on MTN, which was the busiest share on the JSE in terms of volume and value. More than 6 million shares were trade in more 4 000 transactions for more than R145m.
The share price, which closed at R157.40 on Thursday evening, opened R20 or more than 13% lower and by mid-morning was already 15.61% lower at R129.70.
There was also heavy trade in the shares of Mediclinic International [JSE:MDC] with the stock trading 2.5% lower at R183.50.
Sasol [JSE:SOL] lost 2.33% to R431.00 as the oil price rally came to an end, after US crude inventories rose by 2.1 million barrels last week to a peak of 504.1 million barrels.
It was the third week of record highs in the past month, data from the US government's Energy Information Administration showed on Thursday.
Hopes that an agreement between major producers would help lessen the oil glut have also dimmed after Saudi Arabia's foreign minister said the country is not is "not prepared" to cut oil production.
In the resources sector Kumba Iron Ore [JSE:KIO] was another 3.47% higher at R61.49, after the share price gained more than 40% over the past seven days and 89% over the past 30 days.
The stock is not only regarded as extremely oversold but is also supported by an increase of more than 20% in the ultra low iron ore price.
The higher price is the result of restocking by Chinese steel mills after the Lunar New Year holiday period, inclement weather which slowed shipments out of Australia and the temporary closure of Vale’s Tubarão port in Brazil, responsible for about 8% of seaborne iron ore supply.
Analysts warned however that these factors are only temporary and that the price could retreat to previous levels.