The JSE closed weaker on Monday as the stronger rand supported banking‚ retailer and property stocks following S&P Global Ratings’ downgrade announcement on Friday. Miners closed in the red.
In an unusual development‚ the rand firmed more than 2.5% against the dollar in the course of the day.
S&P has downgraded SA’s local currency rating to sub-investment or junk status.
The rand was at R13.77 to the dollar from R14.0986 soon after the JSE’s close‚ after hitting R13.675 during the day. The relief rally also extended to gains by the local currency on the euro and pound.
The movement was surprising‚ as junk status would lead to an outflow of local bond investments from world government bond indices‚ thereby potentially weakening the local currency.
Analysts said the rand’s strong performance was based on optimism that Deputy President Cyril Ramaphosa would be elected as ANC president next month.
It was also hoped that the government would address the fiscal constraints‚ identified by the ratings agencies‚ in the February budget.
There was general relief that Moody’s had retained its local currency credit rating for now.
Reports that a proposed R40bn free education plan would be financially sustainable‚ also supported the rand.
“Most analysts believe a clear win for Ramaphosa would be positive for markets‚ while a victory for Nkosazana Dlamini-Zuma‚ the other main contender‚ could place further pressure on the currency‚” said Bravura analyst Ian Matthews.
Naspers led the gains for most of the day‚ but rand hedges were lower on the rand. Platinums turned weaker in later trade‚ despite a firmer metal price.
Stanlib retail investment director Paul Hansen said the markets had largely anticipated the S&P rating downgrade. A positive report from RMB Morgan Stanley capped further losses.
“They upgraded SA equities from underweight to neutral‚ saying SA has cheap valuations relative to other emerging markets‚” he said.
According to Hansen‚ this was based on a market-friendly outcome at the ANC’s conference in December.
European markets followed Asian markets lower‚ while the Dow was up 0.19% after the JSE closed.
The all share closed 0.28% lower at 60‚157.6 points and the bluechip top 40 dropped 0.35%. Resources lost 2.13%‚ the platinum index 1.98%‚ the gold index 1.3% and food and drug retailers 0.31%. Banks rose 1.79%‚ financials 0.81%‚ general retailers 0.66% and property 0.39%.
Anglo American closed 2.73% lower at R263.68.
Richemont ended the day 1.9% lower at R121.15 and British American Tobacco 1.26% at R918.28.
Sibanye closed 2.42% down at R18.94 and Impala Platinum 2.76% at R43.76.
Standard Bank jumped 2.32% to R172.20 and Barclays Africa 2.19% to R154.61.
Steinhoff shed 2.52% to R54.48 and Spar 1.18% to R183.75. Woolworths gained 1.44% to R58.40.
Vukile Property Fund gained 2.75% to R20.15. The group increased its dividend by 7.4% to 72.6535c per share for the six months to end-September.
Naspers rose 0.87% to R3‚793.84.
Tiger Brands shed 1.45% to R397. The group said revenue grew 2.3% to R31.3bn in the year to end-September‚ while net profit declined 5.5% to R3bn.
Sappi dropped 2.94% to R99.75.
By: Maarten Mittner – BusinessLIVE
Source: TMG Digital.