MARKET WRAP: JSE ends higher, led by banks, as investors digest the new cabinet

The JSE closed higher on Thursday, led by banks and retailers, as global equities found buyers after their recent sell-off.

The mood soured on Wednesday on talk of China upping the ante in the US-China trade war through restrictions on exports of rare-earth metals. Despite support for risk assets on Thursday, great concern about the implications of the US-China trade war remains, said Oanda analyst Craig Erlam in a note.

Domestic news was somewhat favourable as well, and the rand has firmed slightly since President Cyril Ramaphosa announced his new cabinet late on Wednesday night. Analysts have welcomed both a reduction in the size of the executive, as well as the retention of some key figures, notably Tito Mboweni as finance minister.

“Overall we see the new cabinet as modestly positive, supporting our view that SA’s prospects are gradually improving as Ramaphosa’s leadership steadily delivers better governance,” said Old Mutual conservative fund manager John Orford. “This should support SA assets, including the currency. However, we still need to see more delivery; delivery of policy certainty, fiscal prudence and a robust turnaround strategy for Eskom in the near future.”

As the JSE closed the rand was 0.25% weaker at R14.688/$, but has still firmed about 5c since Ramaphosa’s cabinet announcement.

The all share gained 1.28% to 55,700.6 points and the top 40 1.35%. Banks rose 3.2%, gold miners 2.65% and financials 2.59%.

Shortly after the JSE closed the Dow was up 0.2% to 25,175.8 points; in Europe, the FTSE 100 had gained 0.67%, the CAC 40 0.63% and the DAX 0.62%.

Gold was up 0.38% to $1,284.59/oz and platinum 0.14% to $794.81. Brent crude had slipped 1.84% to $68.63 a barrel.

Local data on Thursday was a little downbeat. Farm and factory gate inflation, as measured by the annual change in the producer price index (PPI), accelerated to 6.5% in April from March’s 6.2%.

Despite this rise, both consumer and producer inflation are expected to remain relatively contained for the remainder of this year, said Nedbank Group economic unit analysts. This, against the backdrop of a weak economy, should be sufficient to convince the Reserve Bank to leave interest rates on hold for an extended period, they said.

FirstRand added 3.52% to R66.25, Nedbank added 3.77% to R260, and Absa 3.76% to R168.67.

Nampak gained 3.41% to R10.60, despite the company reporting that its revenue fell 4% to R8.5bn for the six months ended-March.

Life Healthcare added 0.56% to R23.21, despite the private healthcare operator saying earlier that its interim profit after tax fell 46.9% to R498m in the six months to end March. 

Fortress B shares gained 2.2% to R11.61. The property company said on Thursday that it had spent R438.2m on share buybacks since the end of November 2018.

Omnia slumped 12.16% to R46.60. It said earlier that it intended to tackle its debt burden via a R2bn share issuance. The company’s market capitalisation is about R3.2bn.

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