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JSE in holding pattern as markets await ECB move

Mar 10 2016 13:15
David van Rooyen

Johannesburg - The JSE did not move much on Thursday morning, with investors waiting in line with markets elsewhere in the world for news about possible fiscal stimulation by the European Central Bank (ECB) at its meeting later in the day.

Resources shares were somewhat higher after investors started buying again after the sharp pullback of the previous two days, but financial shares were softer after profit-taking on some of the stocks which have made strong moves over the past seven days. Sanlam [JSE:SLM] dropped sharply after lacklustre results indicating difficult trading conditions in the South African market.

The result was that the All-share index was only 0.12% higher at 51 546 points and the Top 40 index gained 0.04% to 45 636 points. The Financial index was 1.13% down, but the Resources index gained 1.78%. The Industrial index showed very little movement and dropped only 0.07%.

World markets are discounting further action by the ECB, but there are however traders who are wary about a disappointing outcome after the bank failed to meet the markets' high expectations in December. The problem is that the central bank did not have much room to manoeuvre with interest rates already in negative territory.

The ECB is widely expected to increase the amount of securities it buys from the market each month, as well as moving interest rates further into negative territory.

Michael McCarthy, chief market strategist at CMC Markets, warned however that any stimulatory impact of negative rates is overwhelmed by the signalling effect that Europe is in crisis.

The resources sector was also supported by a mini rally in oil prices with the price of Brent crude still above $40 per barrel, after surging overnight after a large U.S. gasoline inventory drawdown due to improving demand overshadowing record high crude stockpiles. Speculation that top oil producers might soon agree to an output freeze also supported crude prices.

Resources shares are currently quite volatile after a strong surge over the past month as some investors are taking  profit and any drop are utilized by bargain hunters to get in on the run.

Some of the big movers over the past month pulled back sharply over the previous two days but traded higher again on Thursday.

A typical example is Kumba [JSE:KIO], which surged 239.8% over the past 30 days to R110.00 on Monday, but then dropped back 17% to R90 on Tuesday and Wednesday. On Thursday morning the share was heading north again and at mid-morning was 4.87% higher at R94.38.

Platinum shares were in the spotlight again, with Anglo American Platinum [JSE:AMS] 4.72% higher at R387.47.  The share reached a new 52-week high of R415 on Monday, but dropped more than 10% over the following two days to R370.

Lonmin [JSE:LON] was a massive 239.8% higher over the past 30 days at R40.19 on Monday, but has since dropped back to R31.25 and is now only 137% higher over the past month. On Thursday it lost another 2.34% to R31.25.

Impala Platinum [JSE:IMP] was however 4.42% stronger at R47.75, which means it is more than 53% higher than a month ago. At mid-morning Royal Bafokeng Platinum [JSE:RBP] was 1.45% higher at R41.90, but on Monday it went as high as R44.00.

Merafe Resources [JSE:MRF] traded 4.65% stronger on the back of an increase of 23% in revenue and a 65% rise in earnings per share for the year to end-December.

BHP Billiton [JSE:BIL] by mid-morning was 0.57% higher at R176 after trading at R192.30 on Monday. Anglo American [JSE:AGL] traded 1.36% stronger at R114.77 after trading at R131.28 earlier in the week.

Sanlam [JSE:SLM] at mid-morning was already 7.62% lower at R57.80, after gaining more than 11% over the previous seven days. The largest South African-based insurer said full-year profit rose 2.3% after the value of new life business slumped and growth in its home market slowed.

Old Mutual, which was up sharply earlier in the week on the possibility of a major restructuring in the group, rallied 1.59% to R41.41. The share is 10.97% higher over the past week.

equities  |  jse  |  markets


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