Johannesburg - The value of the rand was again the big role player on the JSE on Friday, as the local currency strengthened almost 1% against the dollar after weak US data reduced already low expectations of an interest rate hike by the Federal Reserve next week.
Low US interest rates should also be good for local stocks, as this means foreign investors will continue to seek for higher yields in emerging markets to escape the super low yields in their own countries. However, the stronger rand again put a cap on the share prices of the dual-listed conglomerates which earn most of their income abroad. The result was that the local market hardly moved at all.
A strong rand means that these companies, which represent a major part of the JSE’s market capitalisation, earn less in rand.
By mid-morning on Friday the All-share index was unchanged at 52 177 points. The Top 40 index traded only 0.07% higher at 45 746 points. The Industrial index, which includes all the big shares on the JSE, was 0.06% lower with resources 0.07% stronger.
One of the few exceptions was financial shares, which are supported by a stronger rand and traded 0.52% higher.
The weaker dollar, and the stronger rand which at mid-morning was 0.89% firmer at R14.11 to the dollar, followed on news that US August retail sales and manufacturing output fell more than expected. The lacklustre data prompted the Federal Reserve in Atlanta to lower its third-quarter gross domestic product estimate to a 3% annual rate from 3.3% earlier. US bond yields strengthened, sending the Treasury yield curve surging to its steepest level in two-and-a-half months.
Asian shares were higher on Friday in response to a stronger Wall Street, but still closed the week lower on fears the strong run in the bonds markets is nearing its end.
European markets were however muted, heading for their second week of losses, which put further pressure on the JSE’s dual-listed giants. The Bank of England decided on Thursday not to ease monetary policy further, but rather to wait to see if such a step is needed.
Analysts warned monetary policy may need to reverse sharply if the expected recession as a result of Brexit did not materialise.
Among the big rand hedges on the JSE, Naspers [JSE:NPN] traded 0.12% lower at R2 456.01 and SABMiller [JSE:SAB] slipped 0.58% to R821.33. Sasol [JSE:SOL] was 0.19% softer at R378.71, while Richemont [JSE:CFR] lost 1.36% to R81.85.
MTN [JSE:MTN] however continued its recovery of the past few days after losing more than 20% over the past month. The share price gained 1.03% by mid-morning after firming 2.56% over the previous seven days.
The mobile phone operator has pulled the plug on its local mobile money business, saying it was not viable in a country where around three-quarters of the population already has a bank account. Mobile money services that allow customers to transfer funds using their phones have proved hugely popular in some other parts of Africa, particularly where people have less access to traditional bank accounts.
Vodacom [JSE:VOD] was also 0.77% stronger on R158.14.
Steinhoff [JSE:SHF] was 0.21% higher at R79.92 on news that the High Court of England has approved the proposed scheme of arrangement for Steinhoff’s planned takeover of the British retail group Poundland.
In the financial sector FirstRand [JSE:FSR] was 1.08% stronger at R47.66, and Standard Bank [JSE:SBK] gained 0.70% to R137.76. Barclays Africa [JSE:BGA] gained 1.25% to R147.66. Analysts said Barclays Plc is considering selling all the remaining shares of its 50.1% stake in Barclays Africa on the JSE as talks with various interested parties are stalling.
Glencore ]JSE:GLN], which made its debut in the All-share index on the JSE, traded 1.44% higher on R34.59. South 32 [JSE:S32], the other debutant, gained 1.41% R24.43 to set a new 52-week intraday high.
Anglo American [JSELAGL] was also 0.93% higher on R152.32 and BHP Billiton [JSE:BIL] was 0.39% stronger at R186.70.Read Fin24's top stories trending on Twitter: Fin24’s top stories