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JSE sinks on war of words between SARB and Public Protector

Johannesburg - Yet another controversial statement by a senior public official has again hurt investor confidence and this was reflected in price movements on the JSE on Tuesday.

All major indices were down by mid-morning in reaction to the war of words between Public Protector Busisiwe Mkhwebane and the South African Reserve Bank.

The Reserve Bank says Mkhwebane’s recommendation that constitutional changes be effected to change the central bank’s mandate is unlawful. She recommended constitutional changes on Monday to make the central bank abandon its policy of currency and price stability and promote balanced and sustainable economic growth instead.

The rand, which dropped sharply on Monday in response to the statements, recovered on Tuesday, but share prices fell over a wide front as it became clear that investor confidence has taken a knock.

The rand dropped nearly 2% on Monday to a low of R13.0525, its weakest since June 1, but traded at R12.99 by mid-morning on Tuesday due to strong demand for high-yielding South African bonds. However, the softer rand did not support the prices of dual-listed shares as it normally does.

The latest controversy is the newest in a series of confidence-sapping news, including the controversial Mining Charter announced last week, and news that the South African economy is now in a technical recession with business confidence at its lowest in years.

It was also announced on Tuesday that the current account deficit widened to 2.1% of GDP in the first quarter of this year, from a deficit of 1.7% in the fourth quarter of 2016.

By mid-morning the Tuesday the All-share index was already 0.46% lower at 51 377 points, while the Top 40 index traded 0.45% softer at 45 175 points. The Industrial index was 0.33% lower, the Financial index was 0.57% down and the Resources index had shed 0.77%.

The Gold index, which lost more than 8% over the previous two trading sessions, was 0.07%  softer.

Among the top industrial shares Naspers [JSE:NPN] traded 0.59% lower at R2 579.49, while MTN lost 1.17% to R110.35. Sasol [JSE:SOL] was 1.35% lower at R364.57 and has lost more than 8% over the past month.  Richemont [JSE:CFR] was however 1.18% higher at R108.13 and Steinhoff [JSE:SHF] gained 0.70% to R65.17.

The share price of Barclays Africa [JSE:BGA] did not respond much to Public Protector' Busisiwe Mkhwebane's decision that the banking group must pay back R1.5bn of the lifeboat money received by the former Bankorp, which was later taken over by Absa, now part of Barclays Africa. Absa said it has repaid all the money it owed to the Reserve Bank, and that it will take Mkhwebane's decision on review.

By mid-morning Barclays Africa was only 0.04% softer at R144.27. Standard Bank [JSE:SBK] lost 0.93% to R140.02 and FirstRand [JSE:FSR] was 1.03% softer at R47.02.

Among the resources shares, BHP [JSE:BIL] lost 0.96% to R192.58.

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Rand - Dollar
18.87
+0.3%
Rand - Pound
23.84
+0.3%
Rand - Euro
20.38
+0.3%
Rand - Aus dollar
12.32
+0.2%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
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