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Old Mutual dip drags down JSE

Mar 11 2016 13:46
David van Rooyen

Johannesburg - Old Mutual’s [JSE:OML] share price was again in the spotlight on the JSE on Friday, but this time it price went down compared to Monday’s sharp gains.

Old Mutual PLC announced the expected breakup of the company into four separate businesses on Friday, but the share price dropped as the news was already discounted. The stock rose more than 10% on Monday when the news about a possible breakup was leaked for the first time.

Nedbank [JSE:NED], the bank in Old Mutual which will be separated from the group, also traded lower.

Because of this, the Financial index was the biggest loser among the major indices at mid-morning on Friday and traded 0.76% lower. This pushed the All-share index 0.09% lower to 51 488 points, while the Top 40 index lost 0.14% to 45 484 points.

Market sentiment was uncertain in line with world markets, which on Thursday reacted negatively to the initiatives announced by the European Central Bank to stimulate eurozone growth.

Although these were aggressive, investors were perturbed by a statement by the bank that it has limited scope for further cuts in interest rates, which are already negative. The ECB not only cut all its main rates, but also lifted its asset buying programme by €20bn a month and expanded the assets to include non-bank corporate debt.

Sanity returned to world markets on Friday and by mid-morning the European markets were higher again, and most Asian markets closed stronger.

The Industrial index on the JSE, which includes all the major dual-listed companies, was only 0.13% higher despite firmer European markets; the Resources index was 0.35% softer.

Most of the attention on the JSE was however on corporate news, with Old Mutual again the busiest share in terms of volume. By mid-morning more than 9 million shares had been traded for more than R407m and the stock traded 2.81% lower at R40.14. Before Friday’s trade, the share price was  6.25% higher over the past seven days.

The new group chief executive, Bruce Hemphill, announced the group will separate its four principal businesses - Old Mutual Emerging Markets, Nedbank, Old Mutual Wealth and Old Mutual Asset Management - into separate units.

READ: Old Mutual to split up units to boost growth, unlock value

He said a strategic review showed very limited tangible synergies between the four units. “The new strategy will unlock value currently trapped within the group structure. We have four strong businesses that can reach their full potential by freeing them from the costs and constraints of the group.”

Old Mutual Emerging Markets, which owns 54% of Nedbank, will also distribute some of its shareholding in the bank over time, but the relationship between the two will continue. Nedbank’s share price reacted to the news by losing 2.66% to R176.18. Before Friday’s trade the share price had lost 4.44% over the previous seven days.

Among the other banks, FirstRand [JSE:FSR] traded 0.25% higher at R43.80. Standard Bank [JSE:SBK] was only 0.05% stronger at R122.50.

Sanlam [JSE:SLM], which dropped more than 5% on Thursday after announcing disappointing results, traded 1.47% lower at R58.45. The share price is however still 6.12% stronger for the past seven days after a strong rally earlier in the week.

MTN’s [JSE:MTN] share price, which gained more than 8% over the previous seven days, traded 0.74% lower at R146.41 on news that the cellphone group proposes to pay $1.5bn to settle a record $3.9bn fine in Nigeria for missing a deadline to disconnect unregistered subscribers, who the government claims included Boko Haram Islamist insurgents.

The offer comprises cash instalments, bond purchases and network access. According to reports, the Nigerian Senate Committee on Communications met to discuss the matter on Thursday and concluded that the negotiations with MTN must continue for two more weeks.

The share price of retail group Spar [JSE:SPP]opened sharply higher but then lost ground after the announcement that the South African group bought 60% of the business of Spar Switzerland. Spar South Africa recently acquired the activities of  Spar in Ireland too.

By mid-morning the share price was 0.29% lower at R184.98, but earlier traded as high as R190.00.

Bell [JSE:BEL], the manufacturer of heavy equipment for the construction and mining industries, was one of the star performers on Friday and at mid-morning was already 7.99% higher at R12.97.

The company said in a trading statement that it expects the earnings per share for the year to end-December to be between 157% and 172% higher than the previous year. This is not due to higher demand for the group’s products but the result of greater efficiencies and cost savings.

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equities  |  jse  |  markets

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