Dollar woes benefit certain JSE shares
The dollar’s woes on international markets continued on Tuesday with huge benefits for South African financial and commodity shares.
By midmorning on Tuesday the major indices on the JSE were both almost 1% higher than the previous day, with the resources, gold and financial indices all substantially higher.
The rand also continued its strong performance since Friday, when investor confidence was lifted by Treasury’s successful issuing of a foreign dollar bond in the face of political upheaval and the prospects of looming ratings downgrades.
By midmorning on Tuesday the rand traded at R14.68, close to the high for the year of R14.65 set on March 30. By mid-afternoon the rand was at R14.71 to the dollar. Analysts said the successful placing of the 10-year bond indicated that the sentiment toward South Africa is not a negative as it would seem.
The financial index benefitted from a stronger rand and traded by midmorning on Tuesday 1.31% higher with Standard Bank gaining more than 3%.
A weak dollar is also good for commodity prices, including gold and oil, and the resources index was at that stage 2.88% stronger with a heavyweight like Anglo American almost 7% stronger. The gold index gained another 1.71% with the gold price at $1 258.
The oil price also strengthened on the back of a weaker dollar and Brent crude traded above $43 per barrel. The two major oil producers on the JSE, Sasol and BHP Billiton, were both substantially higher. BHP Billiton was 3.13% higher on R168.13 and Sasol gained 2.87% to R430.50.
Most of the attention in the resources sector was again on Anglo American, which spiked shortly after the opening to a new high for the year of R132.98, almost 8% higher than Monday’s closing price.
The price, however, lost steam with the rest of the market and traded midmorning at R129.41.
The share price reached a 52-week low of R53.30 early in January before recovering to the current levels. The share price is now 86% higher for the year to date as investors seem to gain confidence in the company’s ability to successfully complete the massive restructuring programme announced for the group.
African Rainbow Minerals, the local commodity conglomerate, also gained 4.63% to trade at R96.25, which means the share price is now 116.45% higher for the year to date. ARM’s share price gained from only R37.84 in early January to R116.45 on March 8, before profit taking started. The share price might make a new attempt to reach a new high for the year.
The share price of Kumba Iron Ore rose from only R25.35 early in January to a high for the year of R110.95 in March, but then fell back to R69.00 as a result of profit taking.
Most of the attention in the banking sector was on Standard Bank which traded 3.19% stronger on R126.46. FirstRand gained 1.60% to R46.31, but Barclays Africa was only 0.53% higher on R137.47.