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Johannesburg - Good news for South Africa is necessarily not good news for the JSE. That was again the case on Wednesday morning, when the major indices on the JSE accelerated their losses after it became known that President Jacob Zuma withdrew his application for an interdict to prevent the public protector’s report on state capture being released.
The rand as usual was the driving force on the JSE, as it strengthened dramatically on the news of Zuma’s capitulation - bad news for the big rand hedge shares, most of which are also listed abroad.
The JSE opened lower in line with global markets, which are concerned about possible implications of a narrow presidential race in the United States, but share prices then dropped further as the rand strengthened more than 1% to R13.45 to the dollar by mid-morning.
READ: Rand cheers as Zuma drops bid to halt state
It is often said that the JSE is no longer a reflection of the South African economy, as the major dual-listed shares which represent more than half of its market capitalisation earn most of their income abroad. When the rand is strong, these companies earn less in rands and are also worth less to foreign investors.
The result was that the All-share index at mid-morning was already 1.33% lower at 50 322 points, while the Top 40 index traded 1.49% softer at 43 782 p
oints. The big losers were the Resources index, which lost 2.52% as the dual-listed commodity conglomerates dropped sharply, and the Industrial index, which shed 1.25% in morning trade.
In early trade financial shares were almost 2% lower in line with negative global sentiment, but made a u-turn as the rand started to strengthen. By mid-morning the index was 0.70% lower.
Global shares were down and the dollar lost ground as investors were rattled by signs that the US presidential election race is tightening, just days before the November 8 vote. Markets prefer Democratic candidate Hillary Clinton as she is expected to maintain the status quo, while they are concerned about Republican candidate Donald Trump’s views on foreign relations and international trade.
The S&P 500 index on Wall Street closed on a four-month low on Tuesday, while Asian shares tumbled to seven-week lows on Wednesday. European shares also opened sharply lower for the seventh consecutive day. The CBOE volatility index, often seen as investors' fear gauge, briefly rose to a two-month high above 20%.
The tense backdrop in markets came as the Federal Reserve holds its two-day policy meeting, with its statement due later on Wednesday.
Safe haven assets such as gold were favoured and the yellow metal hit a four-week high of $1 291.6 per ounce on Tuesday. The Gold index was however only 0.02% stronger, as the firm rand hurt gold mining companies’ revenue in rand.
Oil prices tumbled to one-month lows as a trade group's report of larger-than-expected US crude inventory added to concerns about oversupply amid growing doubts over whether oil-producing countries can agree on an output cut later this month.
Sasol [JSE:SOL], whose income from synthetic fuel is determined by the oil price, lost 1.67% to R372.50. Before Wednesday’s trade the share was almost 5% lower over the previous seven days.
Among the dual-listed shares on the JSE, Naspers [JSE:NPN] lost 2.62% to R2 215.50 and Steinhoff [JSE:SHF] was 0.91% softer at R72.92. British American Tobacco (BAT) [JSE:BTI] lost 1.42% to trade at a new 52-week low of R746.00; before Wednesday’s trade the stock was already 15% lower over the past 90 days. Reinet [JSE:REI], whose investment portfolio consists mainly of shares in BAT, lost 0.85% and was also at a 52-week low of R26.78.
Dual-listed financial services group Old Mutual [JSE:OML], also traded at a new 52-week low of R32.71 after losing 1.56% in morning trade. Sanlam [JSE:SLM] was 1.52% softer at R64.25.
Among the banks Standard Bank [JSE:SBK] lost 0.46% to R144.73, FirstRand [JSE:FSR] traded 1.06% weaker at R48.51 and Nedbank [JSE:NED] was 0.57% softer at R221.45.
The major dual-listed commodity giants were all sharply lower despite higher commodity prices. BHP Billiton [JSE:BIL] lost 4.17% to R198.02, Glencore [JSE:GLN] was 4.10% softer at R39.77 and Anglo American [JSE:AGL] shed 3.41% to R183.99.
The major platinum producers were all trading lower, despite reaching a three-year wage agreement with the Association of Mineworkers and Construction Union in the past week without losing one day to a strike. Impala Platinum [JSE:IMP] lost 2.94% to R57.46 and Anglo American Platinum [JSE:AMS] 1.71% to R334.25.
