South African shares surged to life highs on Friday spurred on by the fastest growth in US job growth data in more than two years, but African Bank took a divergent path, falling precipitously after warning of a half-year loss.
South Africa’s biggest unsecured lender flagged it would swing to a first-half loss of $315m after it booked higher non-performing loans and set aside more money to cover future bad debt.
Johannesburg’s benchmark indices logged their best performances ever, the latest in a series of records this year that seem to be defying the laws of market gravity in South Africa’s slow-growth economy.
Non-farm payrolls data showed the US economy added 288 000 jobs in April, beating a 210 000 consensus forecast and bolstering the view that the world’s biggest economy is regaining pace after bad weather hit growth early in the year.
Johannesburg’s All-share index rose 0.45% to 49 091.16, after touching a life high of 49 187.19 earlier. The Top-40 was up 0.48% to 44 015.07 from a peak of 44 129.29.
“It is more and more surprising each day the levels being reached,” said Abri du Plessis, chief investment officer at Gryphon Asset Management, adding the record run was starting to look implausible.
“If you look at the Abil update today it shows how highly geared the average consumer is and the unrest in the mining sector means people are not working,” he said, referring to a strike in the platinum sector now in its 15th week.
African Bank, or Abil, haemorrhaged more than 15% to R10.52, its biggest intra-day drop in nearly a year. The bank has its customer base, the low-income earners, struggle to make payments in an economy that is barely growing.
South African highly indebted consumers – average household debt accounts for 75% of disposable income – are also struggling to find jobs. One in four of South Africa’s are out of a job.
“Expect more pressure on the consumer and earnings and so the market’s strength is a worry,” du Plessis said.
Other banks shrugged off the Abil’s bad news. No. 4 lender Nedbank added 3.3 percent while Standard Group , Africa’s biggest bank by market value, was up 2.1%.
PSG Group, an investment holding company, gained more than 4% to R108.65 after posting a 14% increase in full year earnings and 20% rise in dividend.
Investors traded more than 152 million shares with advancers outpacing decliners 183 to 122, according to preliminary bourse data.