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Johannesburg - News that the proposed merger between Steinhoff [JSE:SNH] and Shoprite [JSE:SHP] has collapsed gave the JSE a massive boost on Monday.
The share prices of both companies jumped by more than 7%, on a day when blue chip shares on the JSE made a strong run.
The blue chip shares were supported by a strong performance by the FTSE 100 index in London as most of the dual-listed shares on the JSE, which represent half of the local market’s value, are also part of that index.
Most of the shares on the FTSE index earn a major part of their income abroad, and they benefited from a drop in the value of sterling after disappointing British retail figures.
The result was that the Industrial index on the JSE, which includes most of the dual-listed shares, was already 1.78% higher by mid-morning on Monday. The weight of these shares gave the All-share index a boost of 0.85% to 52 669 points and the Top 40 index, which consists mainly of these shares, by mid-morning was already 1.2% higher on 45 615 points.
The Resources index, which also includes dual-listed commodity giants, was 0.72% higher but the Financial index was 0.24% softer.
The dual-listed shares also received support from a weaker rand, which at mid-morning was 1.03% softer at R13.14 to the dollar after breaching the important psychological level of R13.00/$ last week.
Most of the attention was on Steinhoff and Shoprite, after the companies said they suspended talks on closer ties. The plan was that Shoprite would take over Steinhoff’s African interests, and that Steinhoff would receive shares in Shoprite in exchange.
READ: Shoprite, Steinhoff shares surge as merger talks collapse
The major shareholders could however not reach an agreement on the exchange rate of these shares and the boards of both companies decided to suspend negotiations.
Investors, who did not like the proposal and sold their shares, were buying them back on Monday. Steinhoff by mid-morning was already 7.6% higher at R71.89 after the share lost 9% of its value over the preceding 90 days. More than 5.5 million shares were traded for R389m.
Shoprite was also in huge demand and more than 3 million shares were sold for more than R707m. By mid-morning the share price was 8.51% higher at R187.77, making up the 7% it lost over the previous 90 days.
Among the other blue chips Richemont [JSE:CFR] gained 1.66% to R99.25 and British American Tobacco [JSE:BTI] was 1.35% stronger at R819.49.
Naspers [JSE:NPN], which represents 20% of the JSE’s value, also gave the indices a big boost by gaining 2.69% to R2 209. Naspers is benefiting from indications of recovery in the Chinese economy as it owns 34.4% of Tencent, the Chinese internet giant listed on the Hong Kong Stock Exchange. This interest represents most of Naspers’ value and income. Tencent traded 0.84% higher in Hong Kong on Monday.
Expectations of solid economic growth in China kept commodities such as copper and iron ore well bid, which supported resources shares. BHP Billiton [JSE:BIL] was one of the busiest shares in the sector and gained 1.06% to R227.84.
In the financial sector FirstRand [JSE:FSR] traded 1.71% softer at R51.01.
Fin24's parent company Media24 is part of the Naspers Group.
