JSE flat before budget with banks under pressure while Steinhoff news lifts retailers
The JSE closed flat on Tuesday ahead of Wednesday’s budget speech by Finance Minister Pravin Gordhan as the market took a wait-and-see approach.
Banks were weaker but food and drug retailers jumped with Shoprite and Steinhoff still gaining after their planned merger was called off. Both shares, however, pared gains toward the close.
Gordhan is expected to deliver another budget in the tradition of fiscal consolidation, keeping the budget deficit at 3.1% of GDP. Analysts said global market developments were more likely to drive the JSE than the budget speech.
Old Mutual Multi-Managers investment strategist Izak Odendaal said small increases in dividend withholding tax or capital gains tax were possible, which would make equities less attractive for investors.
"But since the expected R28bn tax increase was announced in October 2016, it was likely to already be discounted into share prices of domestically focused companies," he said.
Odendaal said sugar and carbon taxes were still being debated and timing was uncertain.
Head of product at Nedgroup Investments cash solutions Sean Segar said he expected a focus on taxing the wealthy in the budget, and other tax avenues such as the fuel levy. "In line with this we also expect a strong line on aggressive government spending cuts," he said.
The JSE closed 0.05% higher at 52,586.60 points and the blue-chip top 40 added 0.11%. Food and drug retailers gained 1.16% while banks lost 1.13%. Platinums added 0.52% and resources 0.46%. The gold index gave up 0.69% and financials 0.23%.
The bullish bias in US markets remains intact with the Dow up 0.40% soon after the JSE’s close. European markets were mixed with the FTSE 100 having shed 0.16% while Germany’s Dax was up 0.97%.
Spot gold lost 0.40% to $1,232 an ounce and platinum 0.76% to $995.77. Brent crude was up 1.50% to $56.96 a barrel.
After firming in early-morning trade Anglo American closed 0.42% lower at R219.95 with analysts saying most of the good news from its annual results was already reflected in its price. The group said it had reduced net debt by 34% to $8.5bn in the year to end-December, well below its $10bn target.
BHP Billiton rose 1.03% to R229.06. The global miner swung into profit in the interim period to end-December, reporting headline earnings of $2.95bn from a loss of $391m in the previous corresponding period.
Kumba Iron Ore rose 3.19% to R220.28.
Transport and logistics group Imperial was 2.82% lower at R176. Headline earnings per share for the first-half to December fell 15% to R6.82 on foreign-exchange losses and higher finance costs.
AngloGold Ashanti closed 0.48% lower at R165.04. It said interim adjusted headline earnings rose to $143m from $49m in 2015.
Sibanye fell 1.65% to R27.98 and Gold Fields 0.71% to R42.20.
FirstRand dropped 2.62% to R50.18 and Barclays Africa 0.66% to R160.27.
Sasfin closed 10.27% lower at R66.40. It said interim headline earnings per share to December 2016 were expected to be 17% to 21% lower than previously.
Shoprite closed 3.52% higher at R194.62, supported by strong interim results to December. It reported diluted headline earnings per share rose 15.5% to 460c. The interim dividend declared was 15.4% higher than the previous one, at 180c per share.
Steinhoff added 2.70% to R72.
In property Hammerson was 0.72% weaker at R95.41. It reported strong annual results on Monday with the dividend increasing 7.6%.
Naspers eased 0.50% to R2,195.
Clover Industries was up 0.37% at R19.10. It said it expected headline earnings per share for the interim period to December to be 12.1%-17.1% lower than that of the previously matching period.