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Strong rand dents industrial shares on JSE

Oct 10 2016 14:38
David van Rooyen

Johannesburg - Share prices on the JSE were again a victim of the strong rand on Monday morning with the Industrial index, which includes most of the major dual-listed shares, the biggest loser.

The indices and share prices however showed only modest movement and the intraday graphs showed an upward trend towards midday.

The rand firmed against the dollar on Friday after US employment growth unexpectedly slowed, cooling bets on a December rate hike by the Federal Reserve that could drain capital away from emerging markets. The local currency maintained stronger levels on Monday and traded 0.63% firmer at R13.77 to a dollar.

Asian markets were stronger on Monday, on hopes that Donald Trump's presidential aspirations have taken a nosedive amid a scandal over comments he made about women, and another poor showing in the second presidential debate. Markets are more confident with Hillary Clinton as a potential president as she is more likely to maintain the status quo.

European shares were again pushed lower by Deutsche Bank’s woes while airline shares took a beating after KLM Air France announced weaker profits after Easy Jet’s profit warning last week.

By midday on Monday the All-share index was 0.19% lower at 51 563 points, while the Top 40 index traded 0.22% softer at 45 014 points.

The Industrial index was 0.34% softer after losing more than 0.5% in earlier trade, while the Resources index, which includes the big dual-listed companies, traded 0.18% higher. The Gold index was virtually unchanged after the gold price climbed more than 0.5% on the back of a weaker dollar.

Financial shares were lower, pushed down by concerns about the banking sector in Europe where Deutsche Bank’s share price fell 2.8%, with traders expressing disappointment at a lack of progress in the company's battle against a US demand for up to $14bn over alleged miss-selling of home loan securities. Deutsche Bank shares remain down by around 50% so far in 2016.

Local financial shares are also hampered by low confidence levels in the financial sector, which has fallen to its lowest level in almost seven years, led by steep declines in confidence in investment banking and life insurance.

The EY Financial Sector Confidence Index, based on a survey conducted and processed by the Bureau of Economic Research at Stellenbosch University, fell to 49 index points in the third quarter from 59 index points previously. The last time confidence in the sector fell below 50 index points was between the fourth quarter of 2008 and the second quarter of 2009.  

Standard Bank [JSE:SBK] traded 0.72% lower, but Old Mutual ]JSE:OML] was 0.20% firmer at R35.32. Coronation [JSE:CML] continued its strong run and lifted 1.62% to R75.20. The share price gained more than 9% over the past 90 days.

The rand is expected to remain relatively strong, hampering rand hedge shares after the weaker-than-expected jobs data in the US on Friday.   

“On balance, the employment report for September suggests that the US labour market continues to expand at a reasonable pace, but it is not reflecting outright vibrancy,” Stanlib’s chief economist Kevin Lings said. This will again make the outcome of the Federal Reserve’s next Open Market Committee uncertain.

Among the big rand hedges Naspers [JSE:NPN] lost 0.58% to R2 328.72 and British American Tobacco [JSE:BTI] was 0.59% softer at R835.80. Steinhoff [JSE:SHF], which is also listed in Frankfurt, traded 0.05% higher at R76.09.

In the resources sector, BHP Billiton [JSE:BIL] lifted 0.45% to R213.74 and Anglo American [JSE:AGL] was 0.05% higher at R176.63. Anglo American Platinum [JSE:AMS] gained 0.30% to R344.63.

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