JSE remains under pressure as rand strengthens

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Cape Town – The JSE remained under pressure on Tuesday in line with Asian markets as the strengthening rand supported banking stocks, but also hurt offshore-based industrial stocks.  

The rand firmed to R13.68 to the dollar as the local bond market benefitted from an inflow of offshore money, increasing the price of local bonds.

Following S&P Global and Moody’s ratings verdicts on Friday evening, bank prices have rallied.

READ: S&P Global downgrades SA to junk, Moody’s places SA on downgrade review

However, banks remain vulnerable to economic difficulties, movements in bond yields and problematic politics. Bond yields remain more attractive in the short term, as noted by the increased holdings by foreigners. 

The All-Share index on Tuesday edged 0.12% lower, while the blue-chip Top40 fell 0.31% as it contains a higher weighting of large industrial companies. 

Financials remained positive, gaining 1% along with the gold miners – which picked up 0.44%.

Resources, meanwhile, fell 2.08%  

Naspers [JSE:NPN] shed 0.36% to trade at R3 780 a share. The group will announce its interim results on Wednesday.

Hudaco [JSE:HDC] gained 5.89% to trade at R131.28. The business has attracted increased interest over the last few years after making several significant acquisitions to diversify away from its heavy exposure to mining and manufacturing.  

Banking stocks

Banking stocks are particularly sensitive to fluctuations in long-dated bond yields with which banks have an inverse relationship.  As the rate on long-dated bonds increase, the share prices of banks may fall. 

Barclays Africa [JSE:BGA] led the banking sector higher on Tuesday,  gaining 2.77% to trade at R158.20, followed by Nedbank [JSE:NED] which was up 2.54% at R224.04.

Firstrand [JSE:FSR] gained 1.75% to reach R55.99, while Standard Bank [JSE:SBK] gained 1.71% to trade at R174.35 at the JSE’s close.  

The share prices of the big four SA banks have been largely range bound, but could be vulnerable to further political shocks and external factors, including foreign shareholders and bond investors heading for the hills should the political situation worsen.  

Market rallies are an opportunity to take money off the table from a trading point of view, or, as market analyst Mark Ingham cautioned “keep your powder dry, bank small gains and take small losses on the chin in a market where sentiment is brittle”

Brent Crude, meanwhile, remains strong at $63.56 per barrell, with no decrease in sight for fuel prices.

Gold prices have ticked higher over the last week, with the precious metal trading at $1 295 per ounce at the close of the market.  

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