Publications
Partners
Johannesburg - Kumba [JSE:KIO], South Africa’s biggest producer of iron ore, lost almost 7% of its value in early trade on the JSE on Friday as iron ore prices continue to tumble on world markets. The stock has now lost almost 35% over the past month.
The lower iron price also pulled the prices of other industrial metals such as copper and aluminium lower, but the rest of the JSE's commodity sector found support in the weaker rand, which dropped 1.63% to R13.62 to the dollar.
A weaker rand means mining companies receive more in rand for their commodities, which negates the lower prices.
By mid-morning the Resources index on the JSE was 1.36% stronger, helping the All-share and Top 40 indices recover from losses over the previous three days.
At mid-morning the All-share index was 0.41% up at 53 625 points, while the Top 40 index gained 0.58% to 47 016 points. The Industrial index was 0.36% higher as positive sentiment on European markets supported the big dual-listed shares. The Financial index was virtually unchanged and traded 0.09% down.
Commodity prices however remain a concern for investors and the share prices of big mining giants such as BHP Billiton, Rio Tinto and the Fortescue Metals Group fell between 2.7% to 3% on the Australian Stock Exchange.
"The fall in commodities prices definitely tells us there is some kind of a moderation under way in the global economy," said Cliff Tan, East Asia head of global markets research at Bank of Tokyo Mitsubishi UFJ in Hong Kong.
BHP Billiton [JSE:BIL] was however 2.81% stronger on the JSE at R200.47; Anglo American [JSE:AGL] gained 2.36% to R178.05. Glencore [JSE:GLN] added 1.88% to R49.84. South32 [JSE:S32], which has a strong aluminium interest, was 2% firmer at R27.03.
The drop in the rand, which last week still stood at levels of R13.00/$, is in line with poor conditions in the commodity market, which is still a major contributor to the South African economy. Other emerging market currencies with links to commodities are also dropping sharply.
The dollar is firm after the US Federal Reserve indicated that the economy is strong enough to justify further interest rate hikes in the US later this year.
The weaker rand however did very little for Kumba, which dropped as low as R143.02 in early trade on Friday - more than 7% down on the previous day’s close. The share price was at that stage almost 38% lower than the 52-week high of R230.32, which was reached as recently as April 4.
The stock, which traded as high R606.79 on February 1 2013, later recovered and at mid-morning was only 2.39% down at R151.79. This is 34.3% lower than a month ago.
Assore [JSE:ASR] did not drop as much as Kumba and was only 0.55% softer at R210.05. The share is only 16.5% lower over the past month.
Sasol’s [JSE:SOL] share price was more than 4% lower in early trade as it reached an intraday low of R390.86 on the back of the plunging oil price. At mid-morning the stock only 1.9% lower at R400.25.
Oil plunged to five-month lows on Thursday amid record trading volume in Brent crude, as OPEC and other producers appeared to rule out deeper supply cuts to reduce the world's persistent glut of crude. Concern over rising global supply and high inventories effectively wiped out most of the gains made since OPEC announced its first supply cut in eight years.
Naspers [JSE:NPN], which took a breather on Thursday, resumed its record-breaking run on Friday and gained 1.09% to reach a new all-time high of R2 587.80.
Richemont [JSE:CFR] was 0.73% higher at yet another 52-week high of R116.85. The share price is now fast approaching the all-time high of R118.73 set in November 2015.
