Johannesburg - The stronger rand, which strengthened almost 2% on hopes that President Jacob Zuma might still be removed, was again the major factor determining which way share prices go.
With the currency trading at R13.54 before lunchtime on Thursday, 1.89% stronger than Wednesday night’s local close, rand hedge shares were losing ground over a broad spectrum pulling the major indices down. The losses were modest after an initial sharp drop.
Financial shares however continued their recovery with banking shares the biggest movers.
By midmorning the All-Share index was 0.18% lower at 54 455 points, while the Top 40-index gained 0.25% to 46 632 points. The Industrial index, which includes most of the big dual-listed shares which earn most of their income abroad, lost 0.21%, while the Resources index was 0.40% lower.
The Financial index was 0.28% higher, with the Banking index gaining 0.41% at that stage on the back of a stronger rand. The Banking index is now trading 5% higher than its close on Monday after losing more than 12% of its value on the news that Pravin Gordhan was sacked as minister of finance in a major cabinet reshuffle.
The rand strengthened dramatically in New York overnight after parliament said on Wednesday a motion of no-confidence in President Jacob Zuma has been postponed until a court decides whether the vote should be taken by secret ballot.
The rand traded at the New York close as low as R13.45, but investors used the opportunity on Thursday to take profits.
Analysts said foreign investors are now buying South African banking shares, because they are very cheap compared to other emerging markets, despite the fact that their foreign credit ratings were downgrade to junk status by two major rating agencies.
Offshore investors bought a net R1.5bn of bank shares, including those of FirstRand [JSE:FSR] and Barclays Africa [JSE:BGA], in the six days after Standard and Poor's downgraded South Africa’s foreign currency debt on April 3. Fitch Ratings followed with a similar cut on April 7.
Excluding bank shares, foreigners sold a net R2bn of other stocks in the same period, bringing the outflow from the JSE this year to R43.8bn.
The busiest banking shares were once again FirstRand which traded 0.89% stronger at R47.50, while Standard Bank [JSE:SBK] was 0.54% higher at R144.26.
Banking shares continued to be supported by stable bond rates and the yield for the benchmark government bond due in 2026 fell 4.5 basis points to 8.825%.
Among the commodity shares BHP Billiton [JSE:BIL] lost 0.89% to R215.67 and Anglo American [JSE:AGL] was 0.54% softer at R198.45. Sasol [JSE:SOL], which gained almost 10% over the past month on the back of softer rand, traded 0.68% lower at R418.33.
Naspers [JSE:NPN] was only 0.02% higher at R2 472.0 but British American Tobacco [JSE:BTI] traded 0.35% lower at R915.75.
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