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JSE continues slide despite Gold index gains

Johannesburg - A strong spike in the Gold index on the JSE on Tuesday was not enough to prevent the market from continuing its gradual slide of the past few days.

The All-share index has now been on a steady decline since April 29, when it still traded at 54 158 points. The index lost 0.54% on Tuesday to trade at only 52 584 points, bringing it more than 2.5% lower over the past week.

The Top 40 index has followed a similar pattern over the past few days, losing 0.56% to 46 173 points on Tuesday, meaning it is now close to 3% lower over the past seven days.

The Gold index gained more than 3.8% on Tuesday after the yellow metal reached its highest level in six weeks, but all the major indices were again softer.

The continual slide in share prices is the result of the strong rand, which continued to trade at R13.74 to the dollar on Tuesday. A firm rand means the big dual-listed shares on the JSE, which represent the biggest part of the indices, earn less in rand on their foreign earnings.

The rand is supported by a strong demand for South African bonds by foreign investors, using carry trade to benefit from South Africa’s higher interest rates. However, foreign investors did not share the same enthusiasm for local stocks, which put another damper on share prices.

Up to the end of last week, foreigners were net sellers of a total R72.4bn of JSE stocks in 2017. Of 105 trading days, only 35 had seen net foreign inflows.

This is in sharp contrast with other emerging markets. The Institute of International Finance said last week that May was the fourth straight month of net portfolio inflows of $20bn or more from foreigners into emerging markets. EPRF Global said last week that emerging market equity funds had posted 11 straight weeks of inflows.

The only highlight on the JSE was the gold sector after the gold price gained 0.70% to trade at $1 288.96, supported by disappointing US jobs data which dimmed prospects for an aggressive run of interest rate increases in the world’s biggest economy.

Higher interest rates put pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion. The resources sector was 0.2% softer.

Sibanye Gold [JSE:SGL], which lost more than 48% of its value over the past month after a rights issue that offers shares at a 60% discount, was one of the busiest shares on Tuesday and gained 3.59% to trade at R16.15.

Gold Fields [JSE:GFI] was the best performing gold share, gaining 4.93% to R49.84. AngloGold Ashanti [JSE:ANG] traded 4.93% higher at R151.45 and Harmony [JSE:HAR] gained 3.52% to R25.28.

The biggest loser was the financial sector, which traded 0.89% lower. The index was pulled down by the insurance giant MMI Holdings [JSE:MMI] which lost 5.56% to reach a 52-week low of R21.25 after disappointing interim results due to a combination of increased disability claims, rand strength and weak investment markets.

MMI is a big player in the disability market, with a market share of about 25% to 26%.

The insurance group reported a 5% decline in diluted core headline earnings and headline earnings per share to R1.6bn and 99.6 cents per share respectively for the six months to end-December.

Old Mutual [JSE:OML] lost 1.78% to R32.52 and Sanlam [JSE:SLM] traded 1.07% softer at R67.27.

Barclays Africa [JSE:BGA] was again the busiest share among the banks but traded 1.32% softer at R150. Standard Bank [JSE:SBK] lost 0.67% to R148.99 and FirstRand [JSE:FSR] was 1.33% lower at R49.14.

The industrial sector was 0.56% down, in line with softer European markets. Naspers [JSE:NPN] lost 0.53% to R2 631.39, but British American Tobacco [JSE:BTI] was 0.84% higher at R923.76.

Telkom [JSE:TKG] traded 2.87% lower at R77.73, despite a record increase in its full-year dividend. The annual payout to shareholders surged 56% to R4.22 per share. Earnings per share increased by 12% to R7.31 in the year to end-March, while operating revenue gained 9.8%.

The good news seems to be discounted already as Telkom’s share price gained more than 11% over the previous 30 days.


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Rand - Dollar
18.91
+0.1%
Rand - Pound
23.87
+0.1%
Rand - Euro
20.38
+0.2%
Rand - Aus dollar
12.31
+0.2%
Rand - Yen
0.13
+0.1%
Platinum
908.05
+1.2%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
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