Tough gets going on JSE

The All-share index opened lower again on Friday morning after closing lower three days in a row. However by midday, all the losses were regained, despite even more bad economic news[1].

The All-share was marginally lower on 49 713 points and the Top 40 index lost 0.3% to 44 730 points. The biggest loser was the Resources index, which was 0.73% lower after being more than 1% in the red earlier in the day.

The Financial index was marginally higher, despite Abil’s share price dropping more than 6%[2] after the rating agency Moody’s cuts its international debt rating to junk because of concerns about non-performing loans.

Investors were peppered this week with bad news about the economy, including the news that the economy contracted[3] in the first quarter with 0.6%. This raised the possibility that South African could face a recession[4], as the crippling strike in the platinum sector is expected to have a bigger negative influence on the economy in the second quarter. In the first quarter when mining production dropped with more than 24%.

A consequences of the strike is spiralling bad debts for micro-lenders such as Abil [JSE:ABL][5], as mine workers without an income cannot afford to service their loans. Earlier this week Abil said non-performing loans is R600m more[6] than expected.

This week the market was also hit by the news that the production price index last month rose to 8.8%[7], much more than expected, credit extension slowed[8] down and that the metals industry also face a strike[9] by 200 000 workers.

The local market is probably popped up by foreign investors, seeking higher yields, as the yields in the developed markets, particularly the US, is still falling.

US bond yields fell to their lowest in nearly one year on Thursday as investors fled to safety due to a sharp downward revision in the US first-quarter gross domestic product.

Yields on the 10-year US Treasury bond briefly sank to 2.44%, a level last seen in June 2013, down from the 12-month peak of 3.0%.

Revised data from the US Commerce Department showed the economy contracted[10] in the first quarter by 1.0%, double the amount analysts estimated.

Foreigners are interested in companies with big market capitalisations with international exposure and that is why the companies in the Rupert-stable all traded at record levels or at levels close to new records.

Remgro [JSE:REM][11] is again in record territory after gaining 0.48% to R222.81. The previous record of R221.82 set on May 23. MediClinic International [JSE:MDC][12] set yet another record of R84.59 (+1.6%).

Richemont [JSE:CFR][13] traded at R109.96 which is just below the record of R110.27 set two days ago.

Reinet [JSE:REI][14], the investment company which holds the Rupert-family’s interest in British American Tobacco [JSE:BTI][15], is also at record levels and on Friday it improved 0.63% to R25.51. This investment company announced its first dividend earlier this week.

BAT gained another 0.67% for another record of R628.35.

Another company with a large capitalisation and international exposure which is back in favour, is Sasol [JSE:SOL][16]. The oil giant gained 0.92% to R601.98 to squeeze past last week’s record of R601.18.

Amongst the big resources companies Anglo American [JSE:AGL][17] lost 1.82% tot R262.55.

In the Financial sector Standard Bank [JSE:SBK][18] was 0.43% higher on R143.61 and Firstrand [JSE:FSR][19] traded 0.53% better on R40.06. African Bank [JSE:ABL][20] was 6.77% lower on R8.40.