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Johannesburg - The rampant rand on Tuesday morning put a stop to the JSE’s strong run of the past few days.
The local unit gained 1.09% in morning trade and at mid-morning stood at R13.20 to the dollar, the highest level in 52 weeks, beating the previous high of R13.22 set in November. Analysts said the rand was lifted by improved risk sentiment globally as fears receded over the impact of US President Donald Trump’s trade policies.
Asian shares reached a 19-month high on Tuesday. Trump made no protectionist remarks during talks with Japan over the weekend, boosting demand for emerging market currencies.
A strong rand is however bad news for the dual-listed shares on the JSE as it makes them more expensive for foreign buyers. A firm rand also means that South African exporters whose products are priced in dollar, earn less in rand.
The European markets' five-day winning streak also came to an end on Tuesday putting further pressure on the dual-listed shares, which are also listed in Europe. Most of them are part of the Industrial index which was already 1.26% lower by mid-morning. The Resources index lost 0.63% and the Financial index was 0.22 softer.
The result was that the All-share index was 0.84% lower at mid-morning at 52 512 points, while the Top 40 index was 0.91% softer at 45 524 points.
The markets are also cautious ahead of Federal Reserve chair Janet Yellen's semi-annual testimony before the US Senate on policy due on Tuesday and Wednesday.
Tom Porcelli, chief US economist at RBC Capital Markets, believes Yellen will outline the case for at least three rate rises this year, rather than the two that the market has priced in.
Among the big guns in the industrial sector British American Tobacco [JSE:BTI] lost 1.21% to R824.63 and Naspers [JSE:NPN] was 2.11% softer at R2 124.63. Bidvest [JSE:BVT] was 1.17% lower at R165.09.
PPC [JSE:PPC], which reached its highest level in ten months on Monday on the news of a possible merger with Afrisam, lost 1.39% to R7.10 on Tuesday.
Although such a deal will create a mega cement maker which will be internationally competitive, it could face hurdles from the competition authorities. PPC chief executive Darryll Castle admitted “competition regulators will play a major role in this transaction”. Some analysts envisage that the deal will be complex and could end up being a drawn-out process, taking as long as a year.
The big mover in the resources sector was Kumba [JSE:KIO], which at mid-morning was already 6.52% lower at R210.80. The company doubled its headline earnings to $607m in 2016 compared to $304m in 2015. The news has however been discounted by investors as Kumba’s share price gained more than 34% over the past month, more than 91% over the past 90 days and more than 317% over the past year.
Kumba’s contribution to Anglo American’s [JSE:AGL] underlying earnings almost doubled to $438m, but Anglo’s share price was 1.51% softer at R228.22. Anglo gained more than 17% over the past month and more than 31% over the past 90 days.
BHP Billiton [JSE:BIL] was 1.16% softer at R228.37 and Glencore [JSE:GLN] lost 1.48% to R54.09. Glencore has increased its hold on the Democratic Republic of Congo's copper and cobalt resources by buying the remaining stake in the Mutanda mine from resource group Fleurette, and increasing its share in Katanga for a total of $960m.
The losses in the resources sector were due to a fair bit of profit-taking as resources prices continued their strong run. Copper hit its highest level since May 2015 after shipments from the world's two biggest copper mines were disrupted, and the price of iron ore climbed to its highest level since August 2014.
Sibanye Gold [JSE:SGL] went against the trend and traded 0.47% higher at R29.63 on news that the company has secured a loan of R35.2bn ($2.65 bn) to support the acquisition of Stillwater Mining Company, the only US miner of platinum and palladium.
