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Anglo, Kumba lead resources rout on JSE

Johannesburg - Anglo American [JSE:AGL] shocked the JSE on Tuesday with bold steps to tide itself over in the midst of a commodity rout that has not been seen in generations, which led to an absolute bloodbath in the resources sector.

Among the biggest losers were Anglo American and its listed subsidiaries in South Africa, which dropped 10% or more. Almost all the major commodity producers are now trading at 52-week lows.

As a result the Resources index was already 5.4% lower at midday at 24 097 points, almost half the level of 46 411 points it had reached in February this year. The index lost almost 30% in the last 30 days before Tuesday’s rout.

The All-share index lost 1.01% of its value by midday and traded at only 49 357 points, which means it is now delivering a negative return for the year so far.

The same can be said of the Top 40 index, which was 1.08% lower at 44 416 points. The Financial index lost 0.84% and the Industrial index 0.50%, despite higher markets in Europe.

The mood in the resources markets was further soured by new indications that the Chinese economy is in a slump. China’s exports fell for a fifth month and a fall in imports extended to a record 13 months, suggesting six interest rate cuts and expedited fiscal spending are failing to boost growth. Inflation data on Wednesday is forecast to show producer price deflation deepened in November.

China is the world's biggest buyer of commodities, and the fall in Chinese demand is one of the reasons for the sharp drop in commodity prices.

A further indicator of poor demand is the oil price, which was trading at the lowest level in almost seven years on Tuesday.

On top of all this, investors were shocked by Anglo American’s announcement that it would suspend its dividend for the second half of the 2015 financial year (which ends in December) as well as for 2016. The share price, which before Tuesday was 62.15% lower than the end of last year, dropped another 9.3% to yet another 52-week low of R73.89.

READ: Anglo shares tumble after it suspends dividends

In what it describes as a radical portfolio restructuring, Anglo will reduce the number of assets it owns by roughly 60% – targeting $4bn from disposals. The company will also consolidate business groups from six to three, namely De Beers, Industrial Metals and Bulk Commodities. It will co-locate its offices with De Beers in 2017.

The biggest loser of the day was Anglo subsidiary Kumba Iron Ore [JSE:KIO], which dropped a staggering 13.55% to only R34.06. The share price, which reached a 52-week high of R249 at the beginning of the year, already lost 83.5% of its value this year before Tuesday’s rout. The stock is now at the lowest level on record.

Kumba said it will restructure Africa’s biggest iron ore mine at Sishen, cutting output there by 28% to combat the plunging price of the raw material. Output for 2016 will be about 26 million tons, compared with a previous plan to produce 36 million tons.

Iron ore with 62% metal content delivered to Qingdao fell 2.4% to $39.06 a dry ton on Monday, a record low in daily prices compiled by Metal Bulletin dating back to May 2009. The metal has plunged 80% since its 2011 peak.

Anglo American Platinum [JSE:AMS] traded 8.12% softer at R168.93.

ArcelorMittal [JSE:ACL], South Africa’s biggest steel producer, lost 7.94% to trade at only R5.33. Before Tuesday’s drop the share lost almost 78% of its value.

BHP Billiton [JSE:BIL] also fell sharply, although a drop of 5.82% to R159.63 seems modest compared to Anglo.  South32 [JSE:S32], which was unbundled from BHP Billiton earlier this year, dropped 7.05% to R10.94, about half the value at which was listed earlier this year.

Glencore [JSE:GLN] lost 10.19% to R17.09.

 
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Rand - Dollar
18.89
+0.2%
Rand - Pound
23.84
+0.3%
Rand - Euro
20.36
+0.4%
Rand - Aus dollar
12.30
+0.3%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
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Top 40
68,346
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All Share
74,536
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Resource 10
57,251
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Industrial 25
103,936
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Financial 15
16,502
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