JSE reaches new records as rand skids

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Johannesburg – The anomaly of the JSE breaking new records while the South African economy is in dire straits continued on Thursday morning, with most of the major indices trading at record levels.

The strong run in share prices however has nothing to do with the state of the local economy, but is due to the value of the rand, which is still trading at the lowest level since December last year. The local unit stood at R14.04 in early trade on Thursday, after dropping as low as R14.09 in response to the Medium-term Budget Policy Statement on Wednesday, which painted a much bleaker than expected picture of the country’s finances.

A weak rand supports the prices of the big dual-listed shares which earn most of their income abroad and earn more in rand if the currency is weak.

The three major indices on the JSE were all at new all-time record levels on Thursday, after gaining momentum on Wednesday afternoon as the rand started stumbling during Finance Minister Malusi Gigaba’s speech in Parliament.

After an hour’s trade, the All-share index was already 0.70% higher on a new all-time high of 58 533 points, while the Top 40 index added 0.80% to trade at a record of 52 272 points.

These indices were driven higher by the Industrial index, which includes most of the big dual-listed capitalisation shares. The index gained 0.57% to a new all-time record of 88 681 points. The Resources index, which benefits directly from a weaker rand as mining companies’ commodities are priced in dollar, was already 2.25% higher at 37 328 points, a new 52-week high. The big commodity giants were all trading at new records.

The Financial index however lost 0.30%, as the financial sector could be affected the most by a further downgrade of South Africa’s credit rating. Such a downgrade seems a strong possibility after news that the expected budget deficit will be much bigger than economists predicted, which means the country’s debt levels could possibly spiral out of control.

British American Tobacco [JSE:BTI] and Richemont [JSE:CFR] were the two dual-listed shares that started the JSE’s run on Wednesday afternoon, as both gained more than 3% and both were stronger again on Thursday.

British American Tobacco traded 1.34% higher at R916.12 on Thursday, after painting an optimistic picture of the prospects of its new generation products on Wednesday.

The company, which hosted a capital day for shareholders and investors in London on Thursday, said the objective is to generate revenue of over £500m this year and to double this to more than £1bn in 2018.

Richemont was 1.64% higher on a new all-time high of R129.59. The share is benefiting from indications that demand for luxury goods is improving. The perception was strengthened on Wednesday when the luxury goods conglomerate Kering, which owns the Gucci brand, announced better-than-expected results. All luxury goods companies are now trading higher in London, including Richemont and LVMH.

Naspers [JSE:NPN], by far the biggest share on the JSE, was however 0.02% lower at R3 328,52 after closing on a new all-time high. Tencent, the Chinese internet giant whose share price is the main driver of Naspers’s value, lost 1.19% on the Hong Kong market as the Asian markets took a breather.

Telkom [JSE:TKH] continued to be in the spotlight after it became known that the government wants to sell its stake in the telecommunications group to fund struggling state-owned enterprises. The share lost 0.55% in the first hour to a new 52-week low of R54.53.

Mediclinic [JSE:MEI], which is trying to expand its interests in Britain, gained 0.92% to R111.80, but MTN [JSE:MTN] lost 2.06% to R121.93 after strong gains early in the week.

The three big commodity giants on the JSE were all sharply higher at new record levels. Glencore [JSE:GLN] gained 1.79% to an all-time high of R70.67 and BHP [JSE:BIL] was 2.33% stronger on a 52-week high of R256.12. Anglo American [JSE:AGL] gained 2.17% to a 52-week high of R267.70.

Two of Anglo’s listed South African subsidiaries were also trading on 52-week highs. Kumba [JSE:KIO] added 3.30% to reach yet another high of R275.61, and Anglo American Platinum [JSE:AMS] gained 0.90% to a high of R378.42.  

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