JSE loses ground as rand forges ahead

Johannesburg - The JSE continued to lose ground on Wednesday to world stock markets, as another powerful performance by the rand continued to take its toll among the big dual-listed rand hedge shares.

READ: Rand races to month high amid SABMiller inflows talk

The All-share index, which closed at its lowest level in two months on Tuesday, shed even more on Wednesday despite a strong rally on global markets. By mid-morning the index was 0.67% down at 50 992 points, while the Top 40 index traded 0.80% softer at 44 506 points.

The main culprit was again the Industrial index, which includes all the big dual-listed shares which make up more than half of the JSE’s market capitalisation. The index was 1.21% softer at mid-morning, after losing almost 4% over the previous seven days before Wednesday’s trade.

The Financial index was 0.31% lower despite a strong run on global markets by banking shares, but the Resources and Gold indices benefited from a weaker dollar, gaining 0.27% and 2.12% respectively.

World stocks rose sharply on Wednesday, led by a surge in bank shares after the Bank of Japan surprised markets by adopting a target for long-term interest rates. The focus now shifts to the US Federal Reserve's policy decision later in the day, with weaker-than-expected economic data prompting investors to call off bets on a rate hike.

The Japanese central bank maintained its 0.1% negative interest rate, but announced a programme under which it will buy long-term government bonds to keep 10-year bond yields around current levels of zero percent.

Analysts said the Japanese measures are good news for bank stocks, as they acknowledged that the negative rate interest policy can hurt bank profits and the measures announced are in a way trying to offset some of that negative impact.

The local banks did not join the run, despite other good news that rating agency Moody’s foresees a possibility of less than 50% that South Africa’s credit rating will be downgraded to junk status at the end of the year.

The financial sector is waiting for the outcome of the South African Reserve Bank’s monetary policy meeting which ends on Thursday, to see what will happen with local interest rates.

The rand, which gained more than 6% from its recent lows, was 1.51% stronger by mid-morning to trade at R13.69 to the dollar, as the greenback remains under pressure with investors not expecting the Fed to hike interest rates before the end of the year.

The local currency is benefiting from an inflow of foreign capital as international investors’ higher risk appetite supports emerging markets worldwide, except for the rand hedge shares which earn most of their income abroad and therefore make less profit when the local unit is strong.

Naspers [JSE:NPN] was again one of the big losers in the Industrial index, trading 1.71% softer at R2 330.02, while Richemont [JSE:CFR] shed 2.06% to R80.96. British American Tobacco [JSE:BTI] lost 0.34% to R859.36.

Among the banks, FirstRand [JSE:FSR] traded 1.47% higher at R48.10 but Standard Bank [JSE:SBK] was 0.19% softer at R138.59.

The two newcomers in the JSE’s Top 40 index, Glencore [JSE:GLN] and South 32 [JSE:S32], both reached intraday 52-week highs before fading in later trade. By mid-morning Glencore was 1.32% softer after reaching a 52-week high of R36.23 in early trade. South 32 reached an intraday high of R29.27, but was later 2.47% down at R28.86.

Anglo American Platinum (Amplats) [JSE:AMS] traded 1.57% higher at R378.61, despite a possible labour dispute at its platinum mines. The National Union of Mineworkers, the second largest union at the group’s mines, said it declared a wage dispute after an offer from the producer it deemed an “insult.”

Amplats offered a pay increase of 6.75% which is far below the 14.5% being sought by union, which said it “remains unshakable” on its demand.