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Johannesburg - Vodacom [JSE:VOD] and some of the high-flying financial shares led a drop in share prices on the JSE on Wednesday, as the local market followed global counterparts lower for a third day in a row.
Vodacom tumbled in early trade and at mid-morning was already 6.42% lower at R166.86 after its parent company, the UK-headquartered Vodafone, said it is selling a chunk of its shares worth almost R15bn to meet the JSE’s 20% free-float requirement.
Vodafone said it will sell about 90 million shares in Vodacom at R165 per share in an accelerated book-build process to institutional shareholders. It assured investors however that it will continue to retain a “controlling majority shareholding” in Vodacom.
The good news about strong second-quarter economic growth in South Africa supported the rand, but it did not help the mood on the JSE. This is because a firm local currency tends to suppress the dual-listed shares in the industrial and resources sectors. The local currency traded at R12.94 to the dollar after reaching R12.86 in late trade on Tuesday.
Global markets were lower on Wednesday after Wall Street retreated on Tuesday, as investors remained cautious after North Korea conducted a powerful nuclear test over the weekend. The dollar was also on the defensive, with tensions in the Korean peninsula showing few signs of abating.
Investors are nervous as the markets are likely to shift their focus to the European Central Bank policy meeting on Thursday, and then the US Federal Reserve’s Open Market Committee meeting later this month.
There is increasing pressure on the ECB in particular to move away from its policy of cheap money, which could have a negative effect on emerging markets such as South Africa. The steady flow of foreign investor funds into emerging markets has shown signs of abating lately.
That is also the reason why local banking shares have been under pressure on Wednesday, because higher international interest rates might force the South African Reserve Bank to follow suit.
By mid-morning the Financial index was already 0.96% lower and the Industrial index, which includes most of the big capitalisation dual-listed shares, traded 0.31% softer. As a result, the All-share index at that stage was 0.60% lower at 55 806 points, while the Top 40 index lost 0.65% to 49 318 points. The resources sector was 1.01% lower due to the strong rand.
Barclays Africa [JSE:BGA] was the big loser among the major banks, shedding 3.96% to R144.06 after earlier trading as low as R142.85. Nedbank [JSE:NED] fell 3.09% to R206.70 after losing almost 4% over the previous seven days.
FirstRand [JSE:FSR] traded 1.01% lower at R54.72 and Standard Bank [JSE:SBK] lost 0.75% to R164.36. Both shares traded at new 52-week highs last month.
Capitec [JSE:CPI], which was on an all-time high of R900.50 last week, shed 3.29% to R868.64. Before Wednesday’s drop the stock was 48% higher over the past year and 29.17% for the year to date.
There was brisk trade in the shares of mobile companies, with Vodacom by far the busiest share on the JSE. Almost 11 million shares were sold for more than R11.8bn.
MTN [JSE:MTN] was the second busiest share, with more than 3 million shares traded for R387m. The price was however steady and at mid-morning had lifted 0.17% to R166.86.
Naspers [JSE:NPN] stabilised and traded 0.5% higher at R2 880.40. British American Tobacco [JSE:BTI] was 0.63% higher at R63.22 and Richemont [JSE:CFR] gained 0.63% to R116.69.
Shoprite [JSE:SHP] was 2.26% softer at R216.00, after shareholders voted in favour of the purchase of about R1.75bn of shares from former CEO Whitey Basson. It was also announced on Wednesday that the retail group has been fined R1m after being convicted of reckless lending.
The National Consumer Tribunal handed down judgment on Wednesday, after a probe showed that Shoprite did not conduct adequate checks to find out if its lenders could service its loans.
