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Johannesburg - The JSE continued to consolidate on Thursday, on the eve of rating decisions by the credit rating agencies.
With the rand trading at the highest level in about a month on Thursday morning, dual-listed shares - which tend to trade lower if the rand is strong - were drifting moderately lower over most sectors.
Analysts said investors are on tenterhooks before the ratings decisions as they could have a devastating effect on the economy, leading to an outflow of capital, the collapse of the rand and higher inflation and interest rates. A downgrade could trigger outflows of more than R100bn from local bonds.
But economists are not sure yet if Standard & Poor's and Moody’s will announce their decision on an expected downgrade on Friday, or only next year after the ANC’s congress and the budget speech in February.
Some brokers think the rand’s current strength might be due to punters who had short-rand positions closing them out in case a downgrade doesn’t happen on Friday,
A Reuters survey among 25 economists indicated that 12 of them think the ratings decision won't happen now.
The rand also received support from the peaceful transition of power in Zimbabwe and a weaker dollar, after poor economic data in the US decreased the possibility of further rate hikes in the US. The US markets are also closed for the Thanksgiving weekend, which could limit activity on the currency markets.
By mid-morning the major indices were pulled down again by the Industrial index, which lost 0.79%; the index includes most of the big value shares. The All-share index was 0.58% softer at 60 398 points and the Top 40 index was 0.71% lower at 54 108 points.
Naspers [JSE:NPN], which closed at R4 090 two days ago, was down for the second day in a row and at mid-morning traded 1.43% softer at R3 844.40. The share followed Tencent, which also traded lower for the second day and lost 1.69% to $419.60.
The stronger rand also influenced Naspers, as most of its income comes from Tencent, which is worth less in rand if the currency is strong.
The same goes for British American Tobacco [JSE:BTI], which dropped 0.77% to trade at R920.50, as well as Steinhoff [JSE:SHF], which lost 0.60% to R56.11. Sasol [JSE:SOL], whose income is linked directly to the oil price in dollar, was 0.85% softer at R435.16.
The Financial index, which is normally supported by a stronger rand, was 0.49% lower as financial institutions will probably be most affected by a credit rating downgrade. Sanlam [JSE:SLM], which traded at new 52-week highs the previous two days, lost 0.90% to R77.05.
Most banking shares were also moderately lower. FirstRand [JSE:FSR], the busiest share on the JSE, lost 0.01% to R54.88 and Barclays Africa [JSE:BGA] traded 0.05% softer at R152.23. Capitec [JSE:CPI], which breached R1 000 for the first time on Tuesday, also lost ground for the second day in a row. By mid-morning the share price was 1.20% softer at R978.13.
Kumba [JSE:KIO], one of the high flyers in the resources sector, also fell victim to profit-taking and shed 2.21% to R319.27. Before Thursday’s trade Kumba gained more than 10% over the past seven days, and 38.5% over the past 30 days.
The resources sector was 0.25% lower, with Anglo American losing 0.12% to R266.77. BHP [JSE:BIL] was however 0.13% higher at R258.09.
Impala Platinum’s [JSE:IMP] strong run came to an end and the share price dropped 0.52% to R42.19. The stock gained more than 14% over the previous seven days and more than 37% over the previous 30 days.
