Publications
Partners
Johannesburg - Another powerful performance by the rand indicated that investors were mostly happy with Finance Minister Pravin Gordhan’s Budget Speech on Wednesday, but the currency’s strong run put a cap on share prices on the JSE .
Financial shares benefited from the rand’s rally, gaining 1.49% after the local unit traded as low as R12.92 to the dollar on Thursday after strengthening significantly on Wednesday. By mid-morning the rand was still at R12.97 - not such good news for the Industrial and Resources indices, which are normally under pressure when the currency is strong.
It is mainly the dual-listed shares in these indices which are the most affected, and the Industrial index was only 0.31% higher by Thursday mid-morning despite strong company results. The Resources index was only 0.05% stronger.
At that stage the All-share index was 0.51% firmer at 52 352 points and the Top 40 index 0.46% up to 45 281 points.
Although there was bad news for the wealthy - and in particular for investors in shares - in the Budget Speech, economists and investors were satisfied with Gordhan’s renewed commitment to fiscal discipline which has probably eliminated the prospects of a further downgrade of South Africa’s credit rating.
“The rand shrugs off the budget speech,” NKC African Economics said in a morning note, adding that the budget had a largely neutral impact on consumer inflation and interest rates.
The local currency was also helped by a slightly weaker dollar, after minutes of the Federal Reserve’s latest board meeting indicated its members are not so sure what the impact of Donald Trump’s economic policies will be on monetary policy.
Most of the attention in the financial sector was on Barclays Africa [JSE:BGA] which reported a slower pace of earnings growth with a 5% rise in year profit on Thursday, hit by rate hikes at home and sluggish growth in Africa which dented consumption and investment spending.
The share price hardly moved and at mid-morning was only 0.20% higher at R157.88.
Among the other banks, Standard Bank [JSE:SBK] gained 1.46% to R147.74 and FirstRand [JSE:FSR] was 0.72% higher at R50.38.
In the insurance sector Discovery [JSE:DSY] gained 4.59% to R124.99 and Sanlam [JSE:SLM] was 2.45% higher at R68.15. Old Mutual [JSE:OML] was however only 0.51% stronger at R35.28.
Naspers [JSE:NPN] lost 0.92% to R2 182.00 and British American Tobacco [JSE:BTI] was 0.57% softer at R809.22
Mondi [JSE:MNP], which is also listed in London, traded 1.74% stronger at R305.00 The paper and packaging company’s underlying profit rose, helped by good performance in all its businesses despite pricing pressure in a number of key paper grades. The company also declared a dividend.
Mondi said underlying operating profit rose 3% to €981m in the full year to end-December from €957m in the previous year, although revenue was down 2% to €6.6bn due to the impact of currency movements.
Bidcorp [JSE:BID] was one of the star performers and traded 8.02% higher at R250.06 after the group’s financial chief said the food services group can tap as much as £1bn for acquisitions of other foodservice groups.
Impala Platinum [JSE:IMP] was one of the big losers in the resources sector and traded 5.62% weaker at R46.51 after the platinum producer posted an interim loss on Thursday. This was largely because the prior period included a tax credit due to a write-off of an amount owed by a debtor.
Sibanye Gold [JSE:SGL] was also in the spotlight; the South Africa gold and platinum producer almost tripled its annual earnings on Thursday and paid a generous dividend. Headline earnings per share leapt 265% to 270c on higher revenues.
This included those generated from the Rustenburg operations it acquired from Anglo American Platinum and a higher rand/gold price for much of the year. The share price however did not respond and at mid-morning was 6.31% lower at R26.20.
