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Industrials make firm recovery on JSE as rand loses ground

Johannesburg - Normality returned to the JSE on Tuesday morning, with the dual-listed shares rallying strongly in response to a much weaker rand.

The rand weakened almost 1.5% to R13.59 to the dollar by mid-morning, after the greenback traded at the highest level against the yen in four months.

The stronger dollar also gave global markets a fillip, boosting the share prices of local conglomerates which are also listed on major markets in London, Luxembourg and Frankfurt.

The dollar is on a run since better-than-expected jobs data in the US was announced on Friday. Investors are waiting for testimony from Federal Reserve chair Janet Yellen to Congress later this week for clues on when the central bank will tighten US monetary policy, but they are already discounting such a possibility.

San Francisco Federal Reserve pesident John Williams said on Tuesday in Sydney that it is reasonable to expect one more rate hike this year.

Further interest rate increases in the US would be bad news for South African bond markets, as this would encourage investors chasing high yields in emerging markets to return their money to the US. Such an outflow is detrimental to the rand, which is now trading at the softest levels since March this year.

A weaker rand is however good news for the dual-listed shares, which earn a major part of their income abroad in foreign currencies which are worth more in rand if the local unit is weak.

The biggest benefactor from the rand’s woes was the Industrial index, which includes most of the dual-listed shares, and mining shares in particular as all their commodities are priced in dollar.

By mid-morning the Industrial index was already 0.72% higher, while the Resources index had gained 1.56% and the Gold index 2.02%. The Financial index was 0.19% softer as a result of the soft rand.

The result was that the All-share index traded 0.72% higher at 52 562 points, while the Top 40 index was 0.86% stronger at 46 374 points.

The industrial index was pulled higher by Naspers [JSE:NPN], by far the biggest share on the JSE, which gained 2.83% in morning trade to R2 588.77. The stock was not only supported by the weaker rand, but also by similar gains in the share price of Tencent on the Hong Kong Stock Exchange.

Naspers owns 34.4% of the Chinese internet giant, which traded 2.5% higher at $HK 278.40 as Asian markets also rallied on the stronger dollar. Naspers’ interest in Tencent represents most of its value and income.

Other stalwarts in the industrial sector were also higher. Richemont [JSE:CFR], which gained almost 14% over the past 90 days, traded 0.80% stronger at R109.48. British American Tobacco [JSE:BTI] was 0.37% up at R904.00 and is now more than 11% higher than three months ago. Steinhoff [JSE:SHF] gained 0.25% to R68.70.

Most of the strong gains were in the resources sector, with Anglo American [JSE:AGL] and BHP [JSE:BIL] among the three busiest shares in terms of turnover as they resumed their rally of the past few days. Anglo was already 3.43% higher at R190.66 at mid-morning, and before Tuesday’s trade already more than 5% higher over the previous seven days. BHP, which gained more than 8% over the previous seven days, added 2% to trade at R221.75.

Resources shares gained despite a drop in precious metal prices. Gold lost 0.24% but platinum shed 1.68% to $893.70, after losing more than 11% over the previous 30 days. Anglo American Platinum [JSE:AMS] gained 2.66% to R306.99, but investors were not as enthusiastic about Impala Platinum [JSE:IMP], which lost 0.39% to R35.90. Impala is now 17.9% lower over the past 90 days and 27.9% over the past year.

In the gold sector Sibanye Gold  [JSE:SGL] was 2.24% higher at R15.54, while AngloGold Ashanti [JSE:ANG] was 1.34% higher at R132.74.


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Rand - Dollar
19.07
-0.9%
Rand - Pound
24.05
-0.6%
Rand - Euro
20.56
-0.4%
Rand - Aus dollar
12.38
-0.2%
Rand - Yen
0.13
-0.8%
Platinum
894.64
-0.3%
Palladium
992.99
-0.9%
Gold
2,198.42
+0.2%
Silver
24.47
-0.7%
Brent Crude
86.09
-0.2%
Top 40
67,986
+0.5%
All Share
74,202
+0.4%
Resource 10
56,458
+1.4%
Industrial 25
103,645
+0.4%
Financial 15
16,496
-0.2%
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