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BHP Billiton lifts JSE as most indices in limbo on Fitch downgrade

Apr 10 2017 12:06
David van Rooyen

Johannesburg - A sharp rise in the share price of BHP Billiton [JSE:BIL], one of the five biggest shares on the JSE and the biggest in the resources sector, pulled the local market higher on Monday morning.

Most indices were in limbo on Monday after Fitch became the second rating agency to downgrade South Africa’s credit rating to junk status, but the Resources index at mid-morning was more than 3% higher after BHP Billiton gained more than 6% in heavy trade.

BHP’s share price started to rise sharply in Australia and continued doing so in London and Johannesburg after a major shareholder asked the company to scrap its London listing.

More than 1 million shares were sold shortly after the opening for more than R224m, and the share traded 6.52% higher at R233.47.

Hedge fund manager Elliott Advisors said on Monday it has sent a plan to BHP directors to unlock shareholder value by scrapping the miner's London Stock Exchange listing, demerging its US oil arm -valued at about $22bn - and revising its capital return policy.

BHP did not immediately provide comment on the matter and it is not clear how such a plan, if accepted, will affect the group’s listing on the JSE.

Elliott said its plan could increase shareholder value by up to 48.6% for holders of BHP's Sydney shares and 51% for London shareholders.

BHP's Australian shares closed 4.64% higher at A$25.73, with most of the gains coming near the end of trade. It was also 4.4% higher in London at mid-morning.

At that stage the Resources index was already 3.13% higher, pulling the All-share index 0.63% up to 53 185 points. The Top 40 index had gained 0.77% to 46 442 points. Nothing happened on the rest of the market, with the Financial index 0.32% softer and the Industrial index only 0.04% higher. The Gold index was 0.97% down as investors took profits after gains of more than 20% over the past week, on the back of a weaker rand a stronger rand gold price.

Trading was muted on global markets, with investors refraining from making big bets because of geopolitical tensions in the Middle East and the Korean peninsula.

Investors also fled to the dollar as a safe haven, with the US currency inching towards three-week highs as it drew support on expectations of further US rate hikes. A strong dollar is good news for commodity prices and stocks.

Local commodity shares were also supported by the weaker rand, which traded about 1% softer at R13.90 in response to Fitch's downgrade on Friday.

READ: Rand heading for R14/$ on second downgrade

Anglo American [JSE:AGL] was one of the busiest shares on the JSE and traded 3.14% stronger at R215.15. The group said on Monday it will sell its Eskom-linked thermal coal operations in South Africa for $166m, as part of a strategic overhaul announced a year ago to cope with a slump in commodity prices.

Glencore [JSE:GLN] added 2.09% to a new 52-week high of R53.97. The share gained more than 7% over the previous seven days.

Sappi [JSE:SAP] and Mondi, the two biggest producers of pulp, paper and packaging, continued to trade at new 52-week highs. Sappi was 1.78% higher on a new high of R99.00, while the dual-listed Mondi plc [JSE:MNP] was 1.20% stronger on a high of R367.87. The locally-listed Mondi [JSE:MND] gained 0.95% to a new high of R337.18.

Among the local resources shares Northam Platinum [JSE:NHM], which gained almost 10% over the previous seven days, lifted 1.66% to a new 52-week high of R58.89.

The banks continued to trade lower and FirstRand [JSE:FSR] dropped 1.34% to R44.20. Standard Bank [JSE:SBK] lost 1.49% to R135.16, but Capitec [JSE:CPI] bucked the trend and gained 2.09% to R734.00.

equities  |  jse  |  markets
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