JSE shrugs off Barclays exit

Mar 01 2016 13:50
David van Rooyen

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Last traded 148
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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA


Last traded 131
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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Johannesburg - The big announcement that British banking group Barclays wants to sell its 62.3% stake in Barclays Africa Group [JSE:BGA] hardly caused a ripple on the JSE on Tuesday morning.

The local market rallied strongly and by mid-morning the All-share index was back above 50 000 points and the Top 40 index traded above 44 000 points, with strong support from financial and resources shares.

It seems news about Barclays, which has been expected for some time now, had been mostly been discounted the day before, when the Barclays Africa share price lost more than 6% of its value.

The market was also pleased by the strong results Barclays Africa announced on Tuesday morning, illustrating the point made by the local group’s management the day before that it is capable of continuing business as usual without the British shareholder’s support.

READ: Barclays Africa’s profits up 10% ahead of possible UK exit

By midday Barclays Africa traded 4.46% up at R140.46 after it opened almost 1.5% higher at R138.00. There was also brisk trade in the share and by mid-morning it was the second busiest share on the JSE in terms of value and volumes. By that time more than 1.2 million shares with a value of over R164m had been sold in more than 2 000 transactions.

Barclays Africa was however not the only banking share on the JSE trading higher on Tuesday. All four big banks were stronger by mid-morning, supported by Absa’s strong results and a much firmer rand. The unit was 1.15% up on the day before. It traded at R15.68 to the dollar compared to R16.16 on Monday, as the Presidency's announcement that Finance Minister Pravin Gordhan's position is not in question calmed nerves about the perceived spat between President Jacob Zuma and Gordhan.

By mid-morning the Financial index was already 2.24% stronger. The helped the All-share index gain 1.28% to 50 047 points, while the Top 40 index was already1.34% higher at 44 390 points. The Resources index added 3.12% on the back of more stimulus measures announced in China to help the world’s second biggest economy, while the Industrial index gained 0.64%.

The big news was however the announcement by Barclays of its firm intention to sell its 62.3% stake in Barclays Africa Group (formerly Absa) over a period of three years. The global banker said the local group’s strong results locally are significantly diluted by the weaker rand at Barclays Group level.

Barclays Africa’s headline earnings grew 10% to R14.3bn, while return on equity improved to 17% from 16.7% a year earlier, comfortably above its 13.75% cost to equity. All the bank’s operating divisions reported growth in headline earnings.

Standard Bank [JSE:SBK] gave the best performance of the other big banks, and by mid-morning the stock was 3.57% stronger at R112.76. FirstRand [JSE:FSR] traded 2.21% higher at R43.57 but Nedbank [JSE:NED] gained only 0.50% to R183.06.

Investors continued to support resources shares, regarded as undervalued. The sector was also boosted by news that the People's Bank of China said on its website on Monday that it had cut its reserve requirement ratio, or the amount of cash that banks must hold as reserves, by 50 basis points.

Analysts also think there is more room for Chinese authorities to stimulate the economy after downbeat manufacturing and service surveys. An official survey showed activity in China's manufacturing sector shrank for a seventh straight month in February, more sharply than expected, while the services sector continued to expand although at its slowest pace since late 2008.

The top commodity groups, which are dependent on China for their exports, traded significantly higher. Anglo American [JSE:AGL] was 6.47% higher at R110.69 by mid-morning and BHP Billiton [JSE:BIL] was 4.89% stronger at R169.39.
Platinum shares performed strongly and Anglo American Platinum [JSE:AMS] was 3.45% higher at R338.70, while Impala Platinum [JSE:IMP] gained 3.11% to R34.50.

Telkom [JSE:TKG] opened sharply lower on Tuesday on news that the company is seeking to cut its workforce to about 8 000 by July, a reduction of about 40%, in an effort to trim costs. The share price has lately recovered on positive market sentiment and traded 0.37% higher at R54.18 after slipping as low as R52.50.

Its main rivals, MTN [JSE:MTN] and Vodacom [JSE:VOD], were both higher. MTN gained 1.46% to R136.00 and Vodacom traded 1.27% stronger at R152.22.     

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equities  |  jse  |  markets



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