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Cape Town - Local financial markets were waiting nervously on Wednesday morning for important announcements and the JSE was at midday a mixed bag, with industrial and financial shares sharply down but resources and gold reacting solidly on good economic news for China and higher commodity prices.
The markets were waiting for the credit rating agency Fitch to announce its latest rating of South Africa’s credit status. Although market participants expected the rating to remain the same, investors were still nervous. Fitch later confirmed that the rating will remain the same. The rand also weakened somewhat.
Investors were also nervously waiting for the latest growth figures as analysts predicted that negative growth will be announced for the first quarter. Negative growth of 1.2% in the first quarter was later confirmed by Statistics South Africa.
By midday on Wednesday the financial index was already 0.99% down and the industrial index traded 0.82% lower. This meant that the All Share-index was 0.56% lower on 54 000 points and the Top 40-index lost 0.61% to 47 762 points.
The declines accelerated after the negative growth was announced just before midday.
The market was also concerned about the news that the World Bank slashed its 2016 growth forecast for South Africa to only 0.6%, 0.8 of a percentage point more slowly than the January estimate.
The World Bank cut its global growth forecast on Wednesday to 2.4% from the 2.9% estimated in January due to stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and diminishing capital flows.
There was however good news on the commodity front with the dollar still at the lowest level in weeks as the possibility of a US rate hike is diminishing fast after the worst US jobs data in six years was announced last Friday.
The latest trade from China was also positive for commodities. Although Chinese dollar-denominated exports declined more than expected, the drop in imports was far less than anticipated. Imports fell only 0.4%, less than the predicted 6%, the smallest decline since they turned negative in November 2014. China's trade surplus is forecast to hit $50 billion in May.
Despite the weak exports, the Chinese central bank said on Wednesday it still expects the economy to grow by 6.8% this year.
The resources index on the JSE was midday 0.60% higher and the gold index gained 0.87%. The upwards momentum in commodity shares prices were inspired by the London market where the UK mining index rose 1.4% on a weaker dollar and higher commodity prices.
The world’s top metals consumer China reported strong copper imports in May. Copper is a leading indicator of trends in the commodity market.
Prices of other industrial metals such as aluminium and nickel also advanced, helping Glencore [JSE:GLE] and Anglo American.
On the JSE Anglo American [JSE:AGL] was midmorning 1.66% higher on R147.47 and Glencore traded 2.20% stronger on R31.15. BHP Billiton [JSE:BIL] was only 0.30% higher on R193.10.
The dollar's weakness also proved to be a boost for gold, which hit a two-week high of $1 252.60 an ounce in morning trade on Wednesday.
Anglogold Ashanti traded 1.83% higher on R245.37 to reach a new intraday 52 week high, beating the previous high of R244.01. Anglogold Ashanti gained more than 66% over the last 90 days and more than 150% over the past six months.
The mood in the commodity sector is also boosted by higher oil prices which jumped to hit eight-month highs on expectations of domestic stockpile draws and worries about supply shortfalls from attacks on Nigeria's oil industry. Brent traded midmorning at more than $51 per barrel.
A report from the trade group American Petroleum Institute (API), released after Tuesday's close showed a crude draw of 3.6 million barrels, larger than expectations of 2.7 million barrels, supporting the market.
Sasol's [JSE:SOL] share price, which lost more than 10% over the previous two days after a profit warning that earnings for the full year could be up to 30% lower, gained 2.77% to R493.95. Analysts said investors were also put at ease by assurances from Sasol’s management that the cost of the group’s new platinum mine in Lake Charles in Louisiana will be contained.
In the industrial sector most of the big capitalisations shares traded lower. Naspers [JSE:NPN] was 1.35% lower on R2 276.78 and British American Tobacco lost 0.27% to R925.65. SABMiller [JSE:SAB] traded 0.49% softer on R930.97 and Anheuser-Busch InBev (AB InBev) was 0.29% weaker on R1 948.25.
AB InBev proposed enhancing a South African employee-share programme amid local union plans to contest the approval of its takeover of SABMiller, as the brewer seeks to clear the last hurdle for regulatory consent in the country.
AB InBev will ensure participants of the plan receive the same premium offered to SABMiller shareholders by guaranteeing a minimum value for the so-called Zenzele shares in SABMiller’s South African unit when the programme matures in 2020. AB InBev is also proposing an upfront cash payment, which would be paid soon after the takeover is completed and would be included in the guaranteed amount.
Bidcorp traded 2.08% lower on R266.38. The share, which was unbundled from Bidvest, listed last week on the JSE at R270 and quickly progressed to R304.00 but has since then given up all those gains. The smaller Bidvest which listed at R120 traded 0.64% lower on R134.04.
