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Johannesburg - The rand continued its strong surge on Friday morning, but the euphoria in the currency market over the Constitutional Court's clear ruling that President Jacob Zuma must repay the state for Nkandla upgrades did not extend to the JSE.
The rand strenghthened to its best levels since December 9 last year after Federal Reserve chair Janet Yellen earlier in the week put an end to speculation over a rise in US interests rates, pushing the dollar to its lowest level in seven weeks.
The Constitutional Court’s decision on Zuma on Thursday, as well as a smaller trade deficit, supported the currency even further and the rand traded at R14.73 to the dollar by mid-morning on Friday.
READ: Zuma's plight no bar for rand
A strong rand is however not good news for rand hedge shares on the JSE, which earn most of their income in foreign currencies abroad. Most of these shares, which also have the biggest market capitalisations, traded sharply lower by mid-morning on Friday which pushed the rest of the market lower.
By mid-morning the All-share index, which before Friday’s trade was almost 3% lower over the previous seven days, was 0.92% down at 51 767 points while the Top 40 index lost 1.00% to 45 676 points.
The Industrial index, which includes all the big dual-listed rand hedge shares, was at that stage 1.07% lower and the Financial index 1.26% softer.
The international mood on the markets was also not supportive, following a rout in Japanese shares on Friday as a gloomy suite of surveys on Japanese manufacturing sparked heavy fund selling and overshadowed upbeat news from China's vast factory sector.
A renewed slip in oil prices added to the cautious mood, while the dollar remained on the defensive ahead of the always-pivotal US payrolls report to be announced later in the day. By mid-morning most of the European markets were also sharply lower, adding to the pressure on the big dual-listed rand hedges.
A deeply disappointing survey of major manufacturers from the Bank of Japan found sentiment at its lowest ebb in nearly three years, which crystallised concerns that the BoJ's dramatic shift to negative interest rates was not working and might never do so.
It even outweighed positive surveys from China, which showed factory activity growing for the first time in nine months and a much-needed pick-up in the services sector.
The positive news about the Chinese manufacturing sector however provided some support for the resources sector on the JSE, and the dual-listed commodity producers did not drop as sharply on Friday morning as some of the other rand hedges. By midday the Resources index was only 0.48% lower.
BHP Billiton [JSE:BIL] lost 0.26% to R165.57 but Anglo American [JSE:AGL] traded 1.26% higher at R116.98. Glencore [JSE:GLN] was 0.48% stronger at R33.20.
Naspers [JSE:NPN] traded 1.41% lower at R2 032.03 after the share lost more than 5% over the previous seven days. It is however still 15% stronger over the past month.
Richemont [JSE:CFR], which also lost almost 5% over the past week, dropped even more steeply on Friday and traded 2.62% lower at R94.94. British American Tobacco [JSE:BTI] traded 1.62% softer at R896.60. SABMiller [JSE:SAB] shed 0.29% to R993.98.
Steinhoff [JSE:SHF], which is also listed in Frankfurt and traded at new 52-week high of R96.85 at the beginning of the week, was 2.03% softer at R94.88.
FirstRand [JSE:FSR] was again one of the busiest shares in the financial sector and lost 1.26% to R116.98. Sanlam [JSE:SLM] was 1.91% softer at R67.18 and Old Mutual [JSE:OML] traded 0.9% lower at R40.61.
