MARKET WRAP: JSE climbs 1% despite pressure on global equities
Banks and retailers fare well as the oil price slips almost 2%, while market heavyweight Naspers climbs 4%
The JSE closed higher on Wednesday despite risk aversion on global markets, as equities in most countries came under pressure from fears over the intensifying US-China trade war.
China is strongly hinting that it may retaliate against the US through unconventional methods, such as restricting exports of rare-earth metals, while investors are also wary about a slowdown of the global economy.
Local diversified miners were under pressure as the oil price fell, but most indices on the JSE registered strong gains. The all share rose 1.04% to 54,997.3 points, and the top 40 1.11%. Banks added 2.8% and financials 1.8%. The resources index gave back 0.98%.
Naspers led the way with a 4.07% climb to R3,221.30, having earlier said that it would list its consumer internet business in Amsterdam in July.
As the JSE closed, the rand was 0.24% weaker at R14.766/$, having earlier reached a seven-month low, extending Tuesday’s 2.11% slide. The local currency has been pressured this week by uncertainty over the composition of President Cyril Ramaphosa’s new cabinet, geopolitical risk, and global growth concerns.
A rebalancing of MSCI’s emerging market index to give greater weighting to Chinese stocks on Tuesday also pressured the rand, analysts said, although the JSE ended the day flat despite a R13.3bn sell-off of equities by foreign investors.
Foreigners have sold off about R40bn of SA equities so far in 2019, consisting largely of locally focused stocks. These sales come amid a tepid economy, and continue to put upward pressure on inflation due to a weaker rand, said SA Institute of Race Relations chief economist Ian Cruickshanks.
Not much should be read into the JSE's performance on Wednesday, as local corporate economic news remains concerning, and the outlook for companies dependent on economic conditions is deteriorating, said David Shapiro from Sasfin Securities. “Historically speaking, valuations may be cheap. But there is no guarantee history will repeat itself. I think there is more to go on the downside.”
Data earlier was somewhat supportive, with the FNB/BER consumer confidence index for the second quarter of 2019 improving somewhat from the first quarter, rising to five index points from the previous quarter’s two.
Diversified miner Anglo American gave up 2.17% to R355.67.
Rand hedge British American Tobacco gave up 1.98% to R523.57 and AB InBev 1.81% to R1,192.15.
Pepkor Holdings slipped 2.15% to R17.32. It said earlier that revenue grew 7% to R35.3bn in the six months to end-March, with operating profit up 6.9% and headline earnings per share 39.9%.
Famous Brands lost 2.32% to R80. It said earlier that its struggling UK-based restaurant chain Gourmet Burger Kitchen’s sales were improving, even though the chain’s operational losses widened in the 52 weeks to February 24.
Shortly after the JSE closed, the Dow was 1.1% lower at 25,068.24 points, while in Europe the FTSE 100 had lost 1.29%, the CAC 40 1.82% and the DAX 30 1.43%.
Gold was 0.21% higher at $1,282.23/oz while platinum had fallen 0.79% to $793.03. Brent crude was 1.6% lower at $68.98 a barrel.