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Gold shares score on JSE as Brexit prompts safe haven flight

Jun 24 2016 12:18
David van Rooyen

Johannesburg - Gold shares were the big winners on the JSE on Friday as investors poured into safe havens to escape the worst global market turmoil in years after Britain voted to leave the European Union.

In early trade the Gold index was already more than 16% up on the previous day as all major gold share prices soared, with AngloGold Ashanti [JSE:ANG] and Gold Fields [JSE:GFI] reaching new 52-week highs.

Gold stocks reacted to a surge in the gold price as investors fled to safe havens such as gold, German bonds and the yen to escape market turmoil following the shock result of the British referendum. The gold price gained more than 4% to $1 316.90.

Global markets tumbled with the British pound dropping to the lowest level in 31 years, international banking shares losing as much as 18% and major European markets sharply down in response to the uncertainty awaiting the international economic and political order.

The local market also felt the turmoil, with the rand dropping even more than in December last year when President Jacob Zuma fired Nhlanhla Nene as minister of finance. Emerging market currencies are often the first to feel the heat when risk averse investors flee to safe havens.

The local unit, which on Thursday traded as low as R14.42, plunged more than 8% to R15.51 before recovering dramatically. By mid-morning the rand was back at R14.94 to the dollar.

READ: Brexit sends rand diving worse than Nene firing

The JSE also did not escape the turmoil and the All-share index in early trade was already 3.81% lower at 51 544 points, while the Top 40 index lost 4.12% to 45 497 points. The Financial index was the biggest loser in response to the sharp drop in international financial share prices, losing 6.08% after earlier being more than 7% down.

The Industrial index, which includes most of the shares which are also listed on the London Stock Exchange, was 3.64% softer with almost all the big capitalisation shares lower. The dual-listed mining shares such as BHP Billiton [JSE:BIL] and Anglo American [JSE:AGL] also led the Resources index 2.20% down.

Most intraday graphs of the JSE bottomed out after a sharp initial drop as calm returned to the market.

Gold shares benefited not only from the higher gold price, but also the weakness of the rand. The rand price of gold, the major indicator of gold mines' profitability, jumped more than 8% to R637 325 per kilogram.

Sibanye [JSE:SGL] was the top performer among the gold shares and increased by 18.64% to R51.80. Gold Fields reached a new 52-week high after it soared 17.32% to R71.20 and AngloGold Ashanti gained 16.38% to a new high of R270.51.

Harmony [JSE:HAR] was more than 14% higher at R54.15, but in the first few transactions the price surged more than 18%. DRDGold [JSE:DRD] traded 13.3% stronger at R8.35.

Top resources shares Anglo American and BHP Billiton were both sharply lower but recovered somewhat from even bigger losses earlier on. Anglo American fell 6.60% to R137.80, but was initially as low as R125.50. BHP Billiton dropped as far as R165.58 but later recovered to trade 5.89% softer at R179.49.

The stronger dollar in response to the turmoil in Europe pushed resources prices down, and Brent crude oil dropped 4% to trade at $49.09. Sasol’s [JSE:SOL] share price was 2.74% lower at R395.37.

Among the big dual-listed shares, Naspers [JSE:NPN] lost 1.92% to R2 187.12, while SABMiller [JSE:SAB] traded 4.91% softer at R870.10. Richemont [JSE:CFR] was initially one of the big losers, trading more than 5% lower before it recovered to a 2.88% loss at R87.75. British American Tobacco [JSE:BTI] lost 3.88% to R881.92.

equities  |  jse  |  markets
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