Johannesburg - A strong rand stormed ahead on Monday morning, which as usual was not good news for the major indices on the JSE.
By mid-morning the local unit was already more than 1.4% firmer at R13.83 to the dollar, after major international credit rating agencies Moody’s and Fitch decided to keep South Africa’s credit rating intact.
READ: Trump, Zuma and ratings reprieve boost rand
Although both warned the situation could change in future, their decisions meant there will be no immediate outflow of capital or restrictions on foreign funds to invest in South Africa.
A strong rand however means the big dual-listed shares on the JSE, which represent more than half of the market’s value, were trading lower as they are worth less in rand. These companies also earn most of their income abroad in foreign currencies, which means they also earn less in rand.
Most of these dual-listed shares are listed in the Industrial index, which was 0.60% lower by mid-morning, while the big dual-listed commodity giants such as Anglo American [JSE:AGL] and BHP Billiton [JSE:BIL] also pulled the resources index 2.62% lower.
That meant the All-share index was already 0.66% lower at 50 311 points by mid-morning, while the Top 40 index lost 0.81% to 43 848 points. The Financial index was however supported by a stronger rand and gained 0.70%.
Sentiment on the JSE - and other emerging markets - was also greatly improved after the dollar and US bond yields fell on Monday, after oil prices slid on fears that producer countries meeting this week could fail to agree an output cut.
Prospects of reduced upward pressure on inflation from oil prices prompted investors to temper expectations of a hike in the US interest rate, bringing down treasury yields and the dollar. That eased worries about capital flight to higher-yielding US markets. The dollar shed more than 0.5% against many emerging market currencies.
Oil prices were down sharply on news that Saudi Arabia will not attend talks on Monday with non-Opec producers to discuss supply cuts.
Analysts also said that there is increasing doubt whether president-elect Donald Trump will be able to work with Congress to push through expansionary economic policies which could lead to higher inflation and bigger budget deficits, which are conducive to higher interest rates.
The top resources shares were all lower. Anglo American lost 2.29% to R213.17 while BHP Billiton traded 3.13% softer at R232.75. Glencore [JSE:GLN] was 1.59% lower at R49.40. These shares all traded at 52-week highs last week.
Prices were lower, although some commodities gained sharply on hopes of strong demand for property and infrastructure investment in China and the United States.
Chinese steel futures jumped over 6%, while iron ore futures also gained about 6% and zinc, used to galvanise steel, powered to a nine-year high on the London Metal Exchange.
Kumba [JSE:KIO] rose sharply on the back of these higher prices and at one stage was on a new intraday 52-week high of R174.7, but then lost ground against the stronger rand and at mid-morning was only 0.8% up at R172.00.
Sasol [JSE:SOL] was hammered by the weaker oil price and lost 0.63% to R365.42.
In the industrial sector, Richemont [JSE:CFR] lost 2.51% to R87.56. Steinhoff [JSE:SHF], which is also listed on the Frankfurt Stock Exchange, was 0.63% weaker at R68.07.
Old Mutual [JSE:OML], which is also listed in London, was hammered by the strong rand and lost 2.64% to R32.81. It was the busiest stock on the JSE, with more than 2.5 million shares sold in early morning trade.