'Lack of trust' boosts downgrade risks

The JSE All Share index ended a lacklustre week in the red as the market struggled to find direction in a choppy environment.

The index closed 0.06% lower at 53,996.10 on Friday, ending the week 0.79% lower, as the market could not hold up above the crucial 54,000 level. The index is 6.6% up for the year.

Market sentiment was cautious following upbeat consumer inflation data which heralded the possibility of lower rates.

In a more mildly dovish stance, the Reserve Bank kept interest rates unchanged, but recognised the possibility of lower rates if inflation continued to surprise to the downside.

However, that prospect failed to move the overall market.

South Africa remains a wait-and-see economy, said Citadel analyst Maarten Ackerman, while the market eyed Moody's expected credit rating announcement.

Ackerman said a lack of trust and confidence in the South African economy had resulted in a dearth of investment, damaging growth prospects.

"This increases the risk of further rating downgrades in the future," he said.

The banking index ended the week 3.95% higher on the firmer rand, while resources retreated by 5.2%. Industrials were flat.

The market gyrated on sharp moves in the rand, with the local currency finally reflecting a firmer bias towards the end of the week.

Analysts warned that market expectations that the ANC would remove President Jacob Zuma from his position may be over-optimistic.

Naspers ended the week 1.16% higher at R2,803 as analysts predicted the share could hit R3,000 soon, despite trading at a p:e of 100.

Among banks, Standard Bank had a good week, closing 5.31% higher at R153.35. FirstRand rose a weekly 2.8%.

But there were also some horror stories among miners. Lonmin ended the week 18.8% weaker as the market fretted over the group's debt position amid a stronger rand. Impala Platinum dropped 13.9%.