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Local financial stocks cheer Fitch rating decision

Jun 02 2017 13:27
David van Rooyen

Johannesburg - Financial shares on the JSE, which have been in the doldrums lately, were buoyant on Friday morning after rating agency Fitch affirmed the country’s investment rating on Thursday.

The Financial index was more than 1% higher in early trade and the All-share index at one stage was back above 53 000 points.

The local market was also supported by global markets which are trading at record levels after strong economic indicators, but the firm rand put a damper on the Industrial and Resources indices.

The rand also responded positively to the news from Fitch and at mid-morning traded at R12.94 to the dollar, after earlier reaching R12.91/$.

Financial shares were in the doldrums after Fitch and Standard & Poor's downgraded South African’s foreign credit rating to junk in response to President Jacob Zuma’s decision to fire Pravin Gordhan as minister of finance.

There were fears that the rating agencies might cut South Africa’s rating even further, but Fitch on Thursday reaffirmed that South Africa’s foreign and local rating will stay at BBB- with a stable outlook.

READ: ALERT: Rand dips below R13/$ as Fitch affirms SA rating outlook as stable

S&P, which cut South Africa’s foreign debt rating to junk status in April, is expected to announce an update later in the day. Moody’s, which has not changed its investment grade rating, is expected to make an announcement in the new few days.

Fitch warned however that weak economic growth remains a key risk, along with funding to prop up state firms and infighting between competing factions in the ANC ahead of the party’s elective conference in December.

The Financial index, which lost 3.45% over the previous seven days, at mid-morning was 0.69% higher after earlier being 1.25% stronger. The index has not recovered all its losses since South Africa's credit rating was downgraded.

Barclays Africa [JSE:BGA] was again the busiest share on the market, with 4.1 million shares sold in more than 5 000 transactions for R601m.

Shares in Barclays Africa worth more than R4.5bn were traded on Thursday after Barclays Plc announced that the sale of Barclays Africa shares far exceeded expectations.

Barclays Plc previously planned to sell a 22% stake of Barclays Africa but managed to sell 285.7 million shares in the company to large investors, equal to a 33.7% stake at R132 per share.

Barclays Africa traded 1.46% higher at R145.65, after the stock gained more than 3.5% in Thursday’s share frenzy. Before Friday’s trade however it was still 4.28% lower over the previous seven days and 11.93 over the past 30 days.

There was also strong demand for shares in Standard Bank [JSE:SBK], which gained 1.97% to R196.33, and FirstRand [JSE:FSR], which traded 1.12% higher at R48.97. Nedbank [JSE:NED] gained 0.78% to R217.86.

Capitec [JSE:CPI] was however 0.17% lower at R770.70 and Investec Plc [JSE:INP] gave up 0.14% to trade at R99.84.

The two biggest insurers, Old Mutual [JSE:OML] and Sanlam [JSE:SLM], were also both sharply higher. Old Mutual gained 1.86% to R32.28 and Sanlam was 1.32% stronger at R68.09. The share was more than 2% stronger in earlier trade at R69.11.

Global stocks hit a record high on Friday and Asian markets rose to their best levels in more than two years as upbeat data on US manufacturing and employment and buoyant European factory growth boosted investor optimism.

The FTSE index in London hit a fresh record high on Friday. Normally this is good news for the dual-listed shares on the JSE, most of which are also listed in London, but the strong rand put a damper on prices as their foreign earnings are worth less in rand.

Naspers [JSE:NPN] lost 0.70% to R2 676.00. The Industrial index was 0.12% softer and the Resources index lost 0.55%. The All-share index was marginally (0.02%) lower at 52 829 points and the Top 40 index was 0.03% softer.

equities  |  jse  |  markets
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