JSE slides as market awaits political moves

Johannesburg - Share prices on the JSE drifted slowly lower on Thursday as the market waits for more news on local political developments and new economic indicators from abroad.

All major indices opened sharply higher on Thursday but prices then started to move sideways, and by midday most of the major indices were modestly lower. The rand also drifted mostly sideways against a stronger dollar and was 0.69% lower than Wednesday at R13.92 to the dollar.

By mid-morning the All-share index was 0.20% lower at 51 404 points and the Top 40 index had lost 0.15% to 44 874 points. Financial shares were the biggest losers with the Financial index 0.88% lower, but the Industrial index was unchanged at that stage.

The biggest turnaround was in resources shares. The Resources index was 0.03% down at mid-morning, but shortly after the market opened it was more than 1% higher. Gold was 0.19% softer, after gaining more than 1.5% in early trade.

The market’s attention is turning towards the mini budget next Wednesday in Parliament, to see what Finance Minister Pravin Gordhan has in mind to promote economic growth and stave off a possible credit rating downgrade.

Markets are also waiting for Gordhan’s court appearance on fraud charges - regarded by legal experts as unfounded - as well as President Jacob Zuma’s court application to keep the public protector's report on state capture out of the public domain. The outcome of both cases will have a major influence on the political landscape and the rating agencies' attitude towards South Africa.

The higher inflation rate announced on Wednesday came as a surprise, but many economists are confident that it is at a turning point downwards which will make further interest hikes unnecessary.

READ: Inflation moves outside target band in September

The international markets are mostly driven by company news, with Wall Street higher after solid company results and with no significant new economic data announced. The European Central Bank is to meet later in the day. Investors expect the ECB to keep policy unchanged, but are focused on whether president Mario Draghi will give any indication of if and when the central bank may begin tapering its bond purchase programme.

Wall Street was particularly pleased with Morgan Stanley’s better-than-expected quarterly profit, which rounded off a string of solid results from big US banks.

With 70 companies in the S&P 500 having reported earnings on Wednesday morning, 80% topped expectations. Third-quarter earnings are now expected to increase 0.5%, which would be the first quarter of growth in five.

European markets were a mixed bag as a clutch of profit warnings from companies throughout the region took their toll on the market. The FTSE index in London was modestly lower, with the Dax in Frankfurt and the CAC 40 in Paris slightly higher.

The Industrial index on the JSE was propped up by the heavyweight Naspers [JSE:NPN], which gained 1.63% to R2 373.00. British American Tobacco [JSE:BTI] was 0.45% higher at R818.47 and Richemont [JSE:CFR] was a modest 0.03% stronger at R93.03.

MTN [JSE:MTN] was again one of the biggest losers among the big rand hedge shares, shedding 2.95% to a new 52-week low of R106.74. The share is not performing well amid reports of disagreements with the Nigerian government, loss of market share in South Africa and poor performances in client satisfaction surveys.

Long-term investors in MTN have already seen 44% of their investment disappear over the past three years. MTN was the busiest share on the JSE in terms of volume and more than 3.6 million shares were sold for more than R388m.

High volumes of insurance shares were traded in the financial sector, with prices mostly lower. Sanlam [JSE:SLM] was 1.05% softer at R63.91 while Old Mutual [JSE:OML] lost 0.88% to R33.77 and MMI Holdings [JSE:MMI] 0.81% to R22.06.

Discovery [JSE:DSY] was however 1.06% higher at R113.70 and Liberty Holdings [JSE:LBH] gained a modest 0.33% to R112.99. Liberty Holdings announced it would buy stakes in two unlisted short-term insurers in Malawi and Botswana as part of its planned expansion into the rest of Africa.

Retail shares were among the busiest but prices tended to be lower on the news that retail sales were weaker than expected. Retail growth was only 0.2% higher on a yearly basis, against market expectations of 0.6%. Shoprite [JSE:SHP] lost 1.77% to R191.32 and Mr Price [JSE:MRP] was 0.68% lower at R159.21.

Resources shares gave up early gains. Anglo American [JSE:AGL] shed 0.47% lower to R177.36 after gaining more than 1% in early trade to reach R181.04.