JSE closes higher as retailers rally while property stocks retreat on rate decision
The JSE closed a little higher on Thursday, as retailers and banks rallied on the Reserve Bank’s decision to keep the repo rate on hold at 6.75%. The tone of speech by Bank governor Lesetja Kganyago was more dovish than that following the previous meeting in November.
Property stocks were the biggest losers on the day, with investors in the sector describing the Bank’s decision as disappointing. "With the improvements in the currency and stability of the consumer inflation rate within the Reserve Bank’s own target range, the time is right for a rate cut to stimulate the economy and property market," said Seeff Property group head Samuel Seeff.
Kganyago painted a positive picture of inflation over the next few years. The Bank revised its consumer inflation forecast downwards for 2018 and 2019, to 4.9% and 5.4%, respectively, from 5.2% and 5.5%.
The Bank maintained its forecast of three rate increases of 25 basis points by the end of 2019, as indicated previously, but now described the third increase as "a marginal call". Furthermore, the timing of the first increase had been pushed out to later in the period, Kganyago said.
The forward-rates agreement (FRA) market suggested that investors have abandoned their briefly held belief that rates will rise, and were actually pricing in cuts in 2018, Capital Economics analysts said.
Kganyago struck a notably more dovish tone than he did in late 2017, said Capital Economics economist John Ashbourne. "Having talked up the prospect of hikes in November, the governor spent most of this speech noting the improvement of the inflation outlook in recent months."
Retailers and banks reacted favourably to the Bank’s decision. Miners were lower on the firmer rand, which earlier tested two-and-a-half year best levels, reaching R12.1523 on a weaker dollar.
Rand hedges and Naspers closed lower.
The Dow opened flat, but still above 26,000 points. European markets were mixed with the FTSE 100 dropping 0.52%, while the DAX 30 had added 0.62%.
General retailers on the JSE rose 4.39%, banks 1.87% and food and drug retailers 1.52%. The property index shed 2.06%, platinums 1.84% and resources 0.82%.The all share was up 0.13% at 61,007.10 points shortly before the close, but due to technical difficulties the JSE was recalculating the final close of the all-share and financial indices.
Sasol fell 3.86% to R435, as Brent crude lost 0.63% to $68.98 a barrel.
FirstRand rose 2.88% to R66.10 and Standard Bank 0.43% to R200.
Steinhoff was up 5.02% to R6.91. It was announced in the day that Jayendra Naidoo would resign as director of Steinhoff International to focus more on his job as chairman of Steinhoff Africa Retail (Star). The latter gained 7.12% to R19.40.
Massmart climbed 3.21% to R144.50 after earlier announcing total annual sales to end-December from South African stores were up 1.5%, while comparable South African store sales declined by 0.2%.
Shoprite was 3.68% higher at a record R239.48, while Pick n Pay added 3.7% at R72.11 and The Spar Group 3.29% to R206.59.
In the property sector Nepi Rockcastle slumped 7.74% to R173.44.
Vodacom rose 3.02% to R149.27, while Naspers was down 0.98% to R3,660.