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Rally in JSE financials gains momentum

Johannesburg - The recovery of the financial sector on the JSE, with banking shares on the forefront, gained momentum on Wednesday despite the news that Fitch also downgraded the top bank’s foreign credit rating to junk.

READ: Banks, Eskom, Transnet and MTN cut to junk status

A firmer rand contributed to the better mood in the financial sector, and it seems yields in the bond market have stabilised.

At mid-morning the Financial index was 1.444% higher with the Banking index, which lost more than 12% after President Jacob Zuma’s controversial Cabinet reshuffle, gaining 2.56%.

This resulted in the All-share index trading 0.75% higher at R53 935 points, and the Top 40 index gaining 0.78% to 47 124 points.

Fitch’s decision was expected as no financial institution can have a higher credit rating than the country’s sovereign rating, which was downgraded last Friday. Standard & Poor's also downgraded South Africa’s foreign rating to junk earlier last week.

The mood in financial markets was determined by the strong rand, which firmed further in earlier trade, adding to gains on Tuesday after the Constitutional Court said it would consider whether a motion of no confidence against President Jacob Zuma should be taken by secret ballot. At mid-morning the local unit traded 1.35% stronger at 13.76 to the dollar.

The rand was also supported by the dollar’s woes, as investors ran for cover on Wednesday as alarming geopolitical news sent the safe-haven yen and gold to five-month highs, and yields on top-rated sovereign bonds to their lowest for the year so far. This lessens the possibility of further rate hikes in the US, which is bad news for the dollar.

North Korea has warned of a nuclear attack on the United States at any sign of aggression, as a US Navy strike group steamed towards the Korean peninsula. President Donald Trump said in a tweet that North Korea was "looking for trouble" and the US would "solve the problem" with or without China's help.

Banking shares were also supported by steadier bond rates, with the rate of the ten-year bond yield stabilising at around 9%. Although this is 0.75% higher than the 8.275% before former finance minister Pravin Gordhan’s aborted overseas roadshow last month, it is still around the same level as at the beginning of the year.

Among the top banks Standard Bank [JSE:SBK] was 2.66% higher at R141.88 and Nedbank [JSE:NED] gained 2.26% to R141.88. FirstRand [JSE:FSR], which is probably the most liquid share on the JSE, was again the busiest share on the market with more than 5.5 million shares sold for R225m. The share price was 1.79% higher at R46.39.

Barclays Africa [JSE:BGA] was 1.5% higher at R145.27. Barclays’ plan to sell its stake in Barclays Africa is reportedly being hindered by South Africa’s political upheaval and credit rating downgrades. The British banking group planned a bookbuild in the last two weeks to sell more of its shares in Barclays Africa, but postponed this because of concerns over investor appetite due to political and economic uncertainty in South Africa.

Sanlam [JSE:SLM] was 1.69% stronger and Old Mutual [JSE:OML] traded 1.09% higher at R33.39.

Naspers [NPN], the biggest share on the JSE and by far the biggest in the industrial sector, pulled the Industrial index 0.89% higher by lifting 2.35% to R2 507.72.

The e-commerce and pay-TV group said it will pay R960m to increase its stake in local online retailer Takealot. It did not disclose the size of the stake, but Naspers already owns about 40% of Takealot.

Naspers stocks gained almost 17% over the past 30 days and are now fast approaching the all-time high of R2 530 reached on September 6 last year.

British American Tobacco [JSE:BTI] lost 0.76% to R923.31.

The Resources index was 0.22% down due the stronger rand, and the Gold index gained only 0.36%, as the stronger gold price was negated by the firmer rand.


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Rand - Dollar
18.93
-0.2%
Rand - Pound
23.90
-0.0%
Rand - Euro
20.44
+0.1%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.1%
Platinum
906.59
+1.1%
Palladium
1,012.66
+1.1%
Gold
2,221.55
+1.2%
Silver
24.87
+0.9%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.9%
Resource 10
57,251
+2.9%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
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