JSE breaks losing streak as mayhem ensues after UK vote

Jun 09 2017 17:59
Musa Makoni, Trading desk at EasyEquities

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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - The JSE broke a week-long losing streak on Friday as volatility prevailed in global financial markets after the UK parliamentary elections result yielded a hung parliament.

Our local equities opened relatively firmer led by Naspers [JSE:NPN], which took a leaf from its Hong Kong listed associate, Tencent Holdings, which reached new all-time highs in today’s trading session. Naspers did eventually close up 1.28%, having been up 2.28% shortly after the open.

Our attention was more focused on the outcome of the UK parliamentary elections, which saw the Conservative Party failing to secure the majority vote. As a result, JSE listed entities with UK operations traded lower, with stocks such as Capital and Counties and Intu Properties closing in the red, down 1.29% and 1.56% respectively. Nonetheless, it seems Theresa May is going to go ahead and form a government, following a coalition with the Democratic Unionist Party led by Arlene Foster, which gives them just enough of a majority to govern the country. This new situation does bring a new twist ahead of the Brexit negotiations scheduled to start in 10 days.

Moody’s ratings call

On the local front, a small dark cloud hangs over us in the form of the speculated Moody’s rate announcement that could occur after market close on Friday. Moody’s still has South Africa rated two notches above junk status on both  local and foreign debt, therefore a one notch downgrade would still leave South Africa above investment grade.

Fitch has already cut both local and external debt to sub-investment grade, whilst S&P has foreign debt at sub-investment grade. The rand has held well given the poor economic data that we have seen over the past week, therefore the effect of the downgrade should it happen, might be muted on the rand.

Despite this speculation, our local market closed firmer, the JSE All-Share Index closed 0.50% higher, with the JSE Top-40 inching up 0.31%. All the major indices on the JSE managed to close in the green. Financials closed 0.16% firmer, led by Barclays Africa and Standard Bank which closed up 0.97% and 0.69% respectively. Resources closed 0.24% firmer despite weaker gold prices, led by Impala Platinum which closed up 4.14%. Industrials continued the positive market trend eventually closing up 0.61%.

Gold lost some ground on the back of the firmer US dollar, and was trading at $1266.70 per ounce when the JSE closed. The US dollar managed gains after investors sold off the euro and pound in early morning trade after the surprise results of the UK elections. Despite this weakness in the gold price, metals such as platinum and palladium had a good run. Palladium in particular managed to reach an all-time high of $928.36 per troy ounce before retracing back significantly, to trade at $887.74 per troy ounce when the JSE closed.

Brent Crude remained relatively weak, slipping further to reach intra-day lows of $47.40. Investors await OPECs next meeting for further policy direction, and next week’s US Crude Oil Inventories will be closely watched given the surprise that we saw in this week’s number.

*This report is from the Trading Desk at EasyEquities, Fin24's latest content partner on equities and market moves.

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