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Johannesburg - Rising expectations that the US Federal Reserve will raise interest rates for the third time this year lifted the dollar on Wednesday and sent the rand spiralling downwards, supporting dual-listed shares on the JSE which are sensitive to currency movements. The gains were however modest.
By mid-morning the rand was trading more than 1.6% softer at R13.54 to the dollar, after the US currency touched a one-month high against a basket of currencies and interest rate-sensitive two-year US Treasury yields hit their highest since 2008.
This came after Federal Reserve chairperson Janet Yellen said on Tuesday it would be “imprudent” to keep rates on hold until inflation hit 2%.
Analysts said markets are pricing in a 76% chance that the Fed will raise borrowing costs in December, which will make South African interest rates less competitive for foreign investors.
Uncertainty caused by a political wrangle between the Treasury and the Public Investment Corporation (PIC) over a possible bailout for struggling carrier South African Airways (SAA) also continued to dampen demand for the rand, although the government said on Tuesday that state pensions will be safe.
The gains on the JSE were however modest and by mid-morning the All-share index was only 0.16% stronger at 55 160 points, while the Top 40 index traded 0.24% stronger at 48 938 points.
The Industrial index was only 0.11% stronger, but the Resources index gained 0.96% as resources companies earn most of their income in foreign currencies which are worth more if the rand is weak. The Financial index was however 0.25% lower.
Global markets were also higher on news that US President Donald Trump’s administration is preparing to outline a new tax plan for the world’s biggest economy.
Many of the big shares on the JSE, which lost ground on Tuesday when global markets stumbled on new political uncertainty over North Korea, were modestly higher.
Naspers [JSE:NPN], which lost more than 3% on Tuesday, was only 0.04% softer at R2 866.41 at mid-morning, after earlier trading as high as R2 962.00.
Novus [JSE:NVS], the company that housed Naspers’ printing interests, gained 2.97% to R6.25 and was the busiest share in morning trade, with more than 4.5 million shares being sold.
Naspers announced that a book building process to place 35 141 million shares at institutional investors was successfully concluded at a price of R6.15 per ordinary share, which represents a 1.3% premium to Novus’ closing share price on September 26 2017.
These shares are part of the more than 151 million Novus shares Naspers unbundled to shareholders, but were sold for cash to pay out foreign shareholders who cannot receive unbundled shares.
Richemont [JSE:CFR] was 1.26% higher at R120.88, close to a 52-week high of R121.54. British American Tobacco [JSE:BTI] traded 0.90% stronger at R843.09.
Telkom [JSE:TKG], which lost more than 7% on Tuesday on the news that Treasury wants the PIC to buy its entire shareholding of 39.3% in Telkom to raise cash for the embattled SAA, rebounded strongly on Wednesday. By mid-morning the share price was 3.87% higher at R57.23 after closing on a 52-week low of R55.10 on Tuesday.
Insurer MMI Holdings [JSE:MMI], which traded ex-dividend on Wednesday, lost 5.23% in morning trade to reach a new 52-week low of R17.66. Old Mutual [JSE:OML] was one the busiest shares, with more than 3.1 million shares being sold for more than R110m. The stock gained 0.75% to R34.74. Sanlam [JSE:SLM] traded lower for the second day and lost 0.53% to R67.13.
Nedbank [JSE:NED] shed 0.45% to R201.00. FirstRand [JSE:FSR] was 0.82% softer at R52.29, and Standard Bank [JSE:SBK] gained 0.25% to R158.11 in busy trade.
Resources shares responded to the weaker rand. Anglo American [JSE:AGL], which turned 100 on Monday, was 2.96% higher at R238.04. BHP [JSE:BIL] gained 1.29% to R240.32.
