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Johannesburg - Contrary to expectations, the news that South Africa is officially in a recession did not lead to a bloodbath on the JSE on Wednesday and the rand also did not go through the roof.
The slightly softer rand, which lost about 1% of its value on the news that the South African economy shrank 0.7% in the first quarter this year, provided some support for the dual-listed shares which represent most of the value on the JSE but earn most of their income abroad in foreign currencies.
The result was that the All-share index, which lost more than 3% of its value over the previous seven days, was initially in the black for the first time in a week, although it was only a moderate gain of 0.50%. By mid-morning the index was 0.03% weaker at 52 236 points. At that stage the Top 40 index traded 0.07% higher at 45 922 points.
The rand dropped from R12.70 to the dollar in early trade on Tuesday to R12.87 by the close of trade, but recovered to R12.82/$ by mid-morning on Wednesday.
The best performer was the resources sector which was 0.79% higher, supported by the softer rand as well as news that mining was one of the few sectors in the economy to achieve positive growth in the first quarter.
Investors in the sector are however nervous about the new Mining Charter, which will be released next week. Indications are that it will include new empowerment requirements which are unfavourable for mining companies, which they were not properly consulted about.
The Gold index was 0.95% higher as gold - which is at its highest level in six weeks - traded 1% higher at $1 293.15 in reaction to political uncertainties, including tension in the Middle East.
The Industrial index was 0.20% lower, with no support for the dual-listed shares from the FTSE index in London where investors moved to the sidelines on the eve of Thursday’s British election.
Financial shares were 0.23% lower after a promising start. Investors fear that poor economic growth will lead to further downgrades of South Africa’s credit rating. Moody’s, the only rating agency which has not downgraded South Africa’ foreign rating to junk, will announce its latest review later this week.
The big conglomerates were the winners in the resources sector, with Glencore [JSE:GLN] gaining 2.20% to R47.50 and Anglo American [JSE:AGL] adding 2% to R175.66. BHP [JSE:BIL] was 1.11% stronger at R196.42. Before Wednesday BHB traded 3.35% lower over the previous seven days, and Anglo American lost 2.46% over the same period.
Impala Platinum [JSE:IMP], which lost 19% of its value in the last week of May because investors feared a planned rights issue will dilute their interest, continued its recovery on Wednesday. The share price traced 1.86% higher at R38.06, amounting to a gain of 8% since the beginning of June.
In the industrial sector Naspers [JSE:NPN] traded only 0.17% higher at R2 627.80 and British American Tobacco [JSE:BTI] gained 0.58% to R930.91.
Retail shares were however under the whip after the weak performance of trade in the first quarter. The big loser was Pick n Pay [JSE:PIK], which shed 5.12% to R57.25 - a new 52-week low. Spar [JSE:TSG] also reached a 52-week low of 1.40% to R154.10 after disappointing results earlier in the week. The other big food retailer, Shoprite [JSE:SHP], showed remarkable resilience and lost only 0.01% R200.18.
Steinhoff [JSE:SHF], the international food retailer with big retail interests in South Africa, was 2.85% softer at R67.46.
