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Johannesburg - The JSE continued its slow recovery on the JSE on the back of positive sentiment on global markets, but the momentum is slowing as the stronger rand is beginning to have an influence on dual-listed shares.
Although global stocks scaled record highs on Friday, capping their best week in over two months as the dollar stayed close to nine-month lows, the All-share index on the JSE was only 0.02% higher at 53 313 points at mid-morning. The Top 40 index, which includes most of the dual-listed shares, was only 0.03% up at 47 068 points.
Before Friday’s trade the All-share index gained 1.56% over the previous seven days and the Top 40-index improved 1.76% over the period. The JSE is however only 0.87% higher over the past month.
The rand traded at R13.18 to the dollar, after it was down to R13.54 at the close of business on Monday.
Global share prices and emerging market currencies are supported by expectations that the US Federal Reserve will hike rates gradually, as well as prospects of a strong earnings season.
After a scare at the end of last month when stock markets skidded on the view that the era of easy money might be coming to an end across the globe, investors have been soothed by a run of more dovish comments from central bankers.
This is good news for the rand as investment will continue in the bond markets of emerging economies, including South Africa, where much higher yields can be earned than in investors' own countries.
The strong rand is however not good news for the dual-listed shares on the JSE, which represent more than half of the market’s value, as these companies earn most of their income abroad and stocks are worth less in rand if the currency is strong.
The dual-listed shares in the industrial sector are still supported by the positive mood on the foreign markets where they are also listed, but the Resources and Gold indices were lower due to the stronger rand.
The Industrial index was only 0.17% higher and the Financial index gained 0.02%. The Resources index lost 0.30% and the Gold index 1.31%.
Naspers [JSE:NPN], which gained more than 6% over the previous seven days and wiped all the losses of last week’s correction, was only 0.22% higher at R2 691.90. MTN [JSE:MTN] which gained more than 2.5% over the previous seven days, traded 0.12% softer at R120.41.
Richemont [JSE:CFR] continued to drift sideways and was 0.25% lower at R108.69. MTN [JSE:MTN] moved only 0.71% over the past 30 days. Tiger Brands [JSE:TBS] was in demand, but at mid-morning was only 0.29% higher at R374.00.
Retail shares traded higher on hopes that the 14-point plan to improve the economy introduced on Thursday by Finance Minister Malusi Gigaba will boost economic activity.
Woolworths [JSE:WHL] gained 1.05% to R60.49, despite a warning on Thursday by the company that its annual profit could fall by as much as 10% due to increasingly difficult trading conditions at home and in Australia. Woolworths, which sells clothing, groceries and homeware, said headline earnings per share would likely fall by between 5% and 10%.
Mr. Price [JSE:MRP] was 1.93% higher at R164.46 and Truworths [JSE:TRU] gained 2.99% R72.25. The Foschini Group [JSE:TFG] added 2.96% to R144.14.
Kumba Iron Ore [JSE:KIO] lost 1.94% to R170.14, despite an announcement that it expects half-year profits to rise by as much as 58% due to a recovery in iron ore prices. The company said the increase in earnings for the period is largely attributable to higher export prices, partially offset by the stronger rand.
The news is probably already discounted as the share price gained more than 18% over the past month.
