MARKET WRAP: JSE recovers a little as yuan stabilises
China has denied using its currency as a weapon in the US-China trade war, with sentiment boosted by the yuan’s depreciation
The JSE recovered a little from Monday’s losses on Tuesday, as global markets breathed a little easier after the Chinese authorities fixed the yuan back below the psychologically important 7/$ level.
The yuan’s depreciation below this level for the first time in 11-years on Monday wreaked havoc on global markets, with fears growing that foreign exchange may be the next battle ground in the escalating US-China trade conflict. China, however, has denied it is using its currency as a mechanism in its dispute.
The JSE managed strong gains for much of the day, but these were pared as the global equity rebound fizzled toward’s the local bourse’s close.
Moody’s Investors Service also issued a statement saying Eskom’s recent financial results indicate that its capital structure is unsustainable, and that it urgently needs a turnaround plan.
The all share added 0.16% to 55,062 points while the top 40 was flat. Platinums added 2.34% and food and drug retailers 1.22%.
Shortly after the JSE closed the rand was flat at R14.9327/$, while the benchmark R186 bond had strengthened marginally, with the yield falling 0.5 basis points. The rand has lost more than 4% against the dollar so far in August.
Shortly after the all share closed the Dow flat at 25,727 points, while in Europe, the FTSE 100 was down 0.62% and the DAX 30 0.55%. The CAC 40 was flat.
Gold was up 0.55% to $1,471.92/oz while platinum had lost 1.14% to $847.74. Brent crude was 0.53% lower at $59.58 a barrel.
Local news was a little downbeat, with the Treasury’s weekly bond auction showing diminished interest in SA bonds, with Bloomberg reporting that traders only placed orders representing 2.3 times the amount of bonds on offer, down from 3.3 a week ago.
The government upped its bond issuance 37% to R4.53bn this week, raising further money to finance Eskom’s debt. Foreigners have sold off about $1.8bn of SA bonds in the year to date, according to Bloomberg data.
The auction came in a volatile week, including a short-term overreaction to the US-China trade war, and one hopes the poor auction won’t be repeated, said Old Mutual Multi-Managers strategist Izak Odendaal. The sell-off of bonds was due to increasing fiscal risk to SA, although the risk of an outlook downgrade by Moody’s has now likely been priced in.
“The bottom line is there is nothing for the market to absorb; there is no news; there is no credible turnaround plan for Eskom,” Odendaal said. SA bonds are underperforming relative to other emerging markets, largely as a result of the lack of a good reform story, he said.
Curro slumped 13.04% to R18. It said earlier that headline earnings per share (HEPS) for the six months to end-June were expected to grow by 3% to 9%.
Delta Property Fund was flat at R1.80, while Rebosis jumped 14.29% to 56c. The two said earlier they were considering a merger.
Sasol dropped 2.17% to R295, Glencore 1.38% to R42.06, and South32 1.25% to R27.75.