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Rand hedge stocks surge on shock Gordhan move

Oct 11 2016 14:02
David van Rooyen


Company Data

MERAFE RESOURCES LIMITED [JSE:MRF]

Last traded 1
Change 0
% Change -10
Cumulative volume 3337546
Market cap 0

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

COMPAGNIE FINANCIERE RICHEMONT SA [JSE:CFR]

Last traded 111
Change -3
% Change -3
Cumulative volume 2317974
Market cap 0

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

Sanlam Limited [JSE:SLM]

Last traded 76
Change -1
% Change -1
Cumulative volume 1739370
Market cap 0

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

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Johannesburg - The sharp drop in the value of the rand minutes after news that Finance Minister Pravin Gordhan has been served a formal summons by the Hawks has also had a dramatic influence on the JSE.

Rand hedge shares rose sharply, with Richemont [JSE:CFR] on the forefront, but the Financial index in early trade was more than 2.7% down, with some banking shares sharply lower.

The rand lost 2.93% within minutes after the news that Gordhan has been served a summons for fraud, related to the early retirement of Ivan Pillay, the former deputy commissioner of the South African Revenue Service (Sars). Pillay and former Sars commissioner Oupa Magashula were also served with summonses.

The local unit, which stood at R13.77 to the dollar at the beginning of trade, dropped sharply to R14.29 when the news became known, changing hands at R14.24 in mid-morning trade.

The All-share index at mid-morning was 0.62% higher at 51 997 points, while the Top 40 index traded 0.86% higher at 45 506 points.

The indices overall were supported by the Industrial index - which includes most of the dual-listed rand hedge shares - which gained 1.05% by mid-morning. The Resources index was 2.66% higher and the Gold index lifted 2.34% despite a slightly stronger dollar, which pushed commodity prices down.

Mining companies, which sell all of their output on the international markets in dollars, benefit directly from a weaker rand. Well-known commodity groups such as Anglo American [JSE:AGL], Glencore [JSE:GLN] and South32 [JSE:S32] all traded at 52-week highs.

The Financial index was however 2.05% lower at that stage, amid investor concerns about the possible effect on banks' funding costs if the continued drama between the Hawks and Gordhan leads to a downgrade of South Africa’s foreign credit rating. The index earlier shed more than 2.5%.

Standard Bank [JSE:SBK] and FirstRand [JSE:FSR] were among the busiest shares on the JSE; Standard Bank lost 4.41% to R138.85 and FirstRand traded 4.32% softer at R46.18. Barclays Africa [JSE:BGA] lost even more ground, shedding 4.68% to R147.75, while Nedbank [JSE:NED] was 3.62% lower at R218.91.

The rand is also pressured somewhat by the stronger dollar, which extended overnight gains on growing expectations that the Federal Reserve will raise interest rates this year. Traders have priced in a 70% chance that the Fed will hike at its December meeting, up from 66% early on Friday, according to CME Group's FedWatch tool.

Richemont was the star performer among the rand hedges in the industrial sector. The share price, which before Tuesday’s trade was more than 20% lower for the year to date, at mid-morning was 5.43% higher at R90.55; however, in earlier trade it was more than 6% stronger at R92.00. In August the stock was at a 52-week low of R79.54.

Naspers [JSE:NPN] was 1.02% up at R2 350.03 and British American Tobacco [JSE:BAT] gained 2.74% to R850.14. Steinhoff [JSE:SHF], which is listed on the Frankfurt Stock Exchange, traded 0.22% lower at R75.45, in line with the weaker German DAX index.

Anglo American continued its strong run on Tuesday morning and gained 2.76% to another 52-week high of R182.38 after hitting a 52-week low of R53.30 in January. The share, which before Tuesday’s trade was 173.5% higher for the year to date, gained 14.7% over the past 30 days.

Glencore [JSE:GLN] traded 2.68% higher on a 52-week high of R39.91, after gaining 16.3% over the previous 30 days and 94.8% for the year to date.

South32, which in January was as low as R10.34, firmed more than 5% on Tuesday to a 52-week high of R27.08; this means the share price is now more than 120% higher for the year.

Exxaro [JSE:EXX] gained 3.33% to a new high of R108.50 and is now almost 150% higher for the year to date, while Merafe [JSE:MRF] gained 2.61% to R1.18 - more than 76% higher than the 52-week low of only 49c at the end of last year.

Sasol [JSE:SOL] continued its strong recovery of more than 6% over the past seven days and again traded above R300 on Tuesday, when it gained 3.50% to R414.01. The price of Brent crude, which has a direct influence on Sasol’s income from synthetic fuel, surged as much as 3% on Monday.

The gains came after Russia said it was ready to join the Organisation of Petroleum Exporting Countries in limiting crude output. and Algeria called for similar commitments from other non-OPEC producers. OPEC aims for agreements to cut about 700 000 barrels per day in its first reduction in eight years.

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