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Johannesburg - Investors on the JSE decided to take profits on Tuesday after Monday’s strong run, as they move to the sidelines to see what Wednesday's Budget Speech will deliver.
Resources was the only sector in the black on expectations the Chinese economy may have turned a corner. China is the world’s biggest consumer of South African commodities and a strong Chinese economy will keep commodity prices high.
The mood in the resources sector was also supported by the news that Anglo American's [JSE:AGL] profit more than doubled last year amid a recovery in commodities, leading the mining giant to say it no longer needs to sell assets to reduce debt.
READ: Anglo American swings back to profit
By mid-morning on Tuesday the All-share index was 0.32% lower at 32 388 points and the Top 40 index, which made a strong run on Monday, had lost 0.35% to 45 345 points.
The Industrial index, Monday's biggest scorer, was the biggest loser on Tuesday and shed 0.64%. The Financial index was lower for the second consecutive day and lost 0.57%. The resources sector was however 0.43% higher and the Gold index also gained 0.96%.
Anglo American’s share price did not respond much to the positive results and at mid-morning was slightly lower, as the improvement in the group’s fortunes was already discounted in the share price which is more than 22% higher over the past month and more than 115% over the past year.
The stock was initially more than 1% higher on Tuesday at R227.00, but then investors started to take profits and at mid-morning it traded 0.26% softer at R220.30.
Anglo’s results exceeded analysts’ estimates, in sharp contrast to 2015, when investors questioned whether the company could survive tumbling metal prices. Anglo aims to return to an investment-grade credit rating this year and pay a dividend in 2018.
Kumba [JSE:KIO], one of Anglo’s biggest subsidiaries and which will probably not be sold off any more, responded to the news by trading 2.7% higher at R219.24.
BHP Billiton [JSE:BIL] was 1.21% stronger at R229.47 and Glencore [JSE:GLN] was 0.86% higher at R53.68.
The exception in the resources sector was Trans-Hex [JSE:TSX], which lost 9.9% to R4.55. The share already lost more than 7% over the past 30 days, but is still almost 30% higher over the past month.
Mediclinic International [JSE:MEI] was the biggest loser among the big dual-listed shares and at mid-morning was 4.68% lower at R124.14, after losing more than 5.5% in earlier trade.
The market was disappointed by the news that the group’s business in Abu Dhabi had a weaker-than-expected second half, and is now expecting lower revenue and profit margins for the full year. Activities in Dubai, Switzerland and the United Kingdom are still performing well.
Naspers [JSE:NPN] lost 1.39% to R2 175.40 but British American Tobacco was 0.90% stronger at R815.25.
There was still strong demand for the shares of Steinhoff [JSE:SNH] and Shoprite [JSE:SHP] after both made strong gains on Monday on news that talks about a possible merger between the two groups had collapsed. Steinhoff was 1.63% higher and Shoprite gained 1.05% to R189.97.
Shoprite’s management said on Monday that the group will now concentrate on further expansion in Africa.
Barclays Africa [JSE:BGA] traded 1.03% lower at R159.67, in line with the rest of the financial sector, despite news that the Competition Commission has granted the banking group conditional immunity from prosecution in return for its continuing cooperation in the rand currency-rigging probe.
