The JSE opened weaker on Monday in cautious
trade as investors digested the risk of an eventual downgrade after
S&P Global Ratings maintained its negative outlook on South Africa.
S&P lowered South Africa’s long-term local currency rating to BBB from BBB+, while the foreign-currency rating was left unchanged at BBB-, both with a negative outlook.
Although S&P — together with Moody’s Investors Service and Fitch Ratings — did not reduce South Africa’s rating to sub-investment grade, or junk status, over the past week, all remain concerned about South Africa’s low growth and falling GDP per capita ratio. They envisage South Africa’s GDP growth to remain subdued over the next few years, increasing the likelihood of a downgrade.
S&P also cited political tension as a significant risk.
"We think that ongoing continued tensions and the potential for event risk could weigh on investor confidence and exchange rates, and potentially affect government policy direction," S&P said.
Nedbank Corporate and Investment Banking (CIB) said S&P’s announcement amounted to a stay of execution. "It highlighted the urgency of implementing identified initiatives to spur confidence and consequently investment and growth."
Analysts did not exclude some form of a JSE relief rally on the day, with banks recovering in early morning trade, but trade was expected to be volatile as the market sought direction.
At 9.30am the all share was 0.18% lower at 49,168 and the blue-chip top 40 dropped 0.31%. Platinums added 1.83%, food and drug retailers 1.15% and banks 1.05%. The gold index shed 1.12% and resources 0.37%.
Sentiment was also overshadowed by developments in Italy where Italian Prime Minister Matteo Renzi lost the referendum on constitutional reform, increasing calls from anti-establishment groups for Italy to exit the EU.
The negative sentiment toward the EU diminished to a degree by the outcome of the Austrian presidential election, where the right-wing candidate Norbert Hofer lost. The EU is now bracing itself for next year’s French presidential election in which right-wing Marine le Pen is a candidate.
Among individual shares on the JSE, Glencore was 0.94% lower at R48.69.
Anheuser-Busch InBev lost 1.11% to R1,392.22.
Sibanye was 2.35% lower at R28.66, among gold shares.
Standard Bank lifted 1.42% to R149 and FirstRand gained 0.84% to R50.35.
Among retailers, Shoprite was 2.63% higher at R188.58.
Dis-Chem Pharmacies was 0.67% higher at R20.94.
Naspers was 0.43% lower at R1,971.49 with recent weakness linked to the retreat among technology stocks on Wall Street following Donald Trump’s election victory. Naspers is down 6.2% for the year so far.
"The correlation of Naspers with the Nasdaq indicated additional circumspection was appropriate," Momentum SP Reid said in an early morning note.
Spur was an early morning favourite, gaining 2.74% to R32.99.
Brait was 1.20% lower at R84.
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S&P lowered South Africa’s long-term local currency rating to BBB from BBB+, while the foreign-currency rating was left unchanged at BBB-, both with a negative outlook.
Although S&P — together with Moody’s Investors Service and Fitch Ratings — did not reduce South Africa’s rating to sub-investment grade, or junk status, over the past week, all remain concerned about South Africa’s low growth and falling GDP per capita ratio. They envisage South Africa’s GDP growth to remain subdued over the next few years, increasing the likelihood of a downgrade.
S&P also cited political tension as a significant risk.
"We think that ongoing continued tensions and the potential for event risk could weigh on investor confidence and exchange rates, and potentially affect government policy direction," S&P said.
Nedbank Corporate and Investment Banking (CIB) said S&P’s announcement amounted to a stay of execution. "It highlighted the urgency of implementing identified initiatives to spur confidence and consequently investment and growth."
Analysts did not exclude some form of a JSE relief rally on the day, with banks recovering in early morning trade, but trade was expected to be volatile as the market sought direction.
At 9.30am the all share was 0.18% lower at 49,168 and the blue-chip top 40 dropped 0.31%. Platinums added 1.83%, food and drug retailers 1.15% and banks 1.05%. The gold index shed 1.12% and resources 0.37%.
Sentiment was also overshadowed by developments in Italy where Italian Prime Minister Matteo Renzi lost the referendum on constitutional reform, increasing calls from anti-establishment groups for Italy to exit the EU.
The negative sentiment toward the EU diminished to a degree by the outcome of the Austrian presidential election, where the right-wing candidate Norbert Hofer lost. The EU is now bracing itself for next year’s French presidential election in which right-wing Marine le Pen is a candidate.
Among individual shares on the JSE, Glencore was 0.94% lower at R48.69.
Anheuser-Busch InBev lost 1.11% to R1,392.22.
Sibanye was 2.35% lower at R28.66, among gold shares.
Standard Bank lifted 1.42% to R149 and FirstRand gained 0.84% to R50.35.
Among retailers, Shoprite was 2.63% higher at R188.58.
Dis-Chem Pharmacies was 0.67% higher at R20.94.
Naspers was 0.43% lower at R1,971.49 with recent weakness linked to the retreat among technology stocks on Wall Street following Donald Trump’s election victory. Naspers is down 6.2% for the year so far.
"The correlation of Naspers with the Nasdaq indicated additional circumspection was appropriate," Momentum SP Reid said in an early morning note.
Spur was an early morning favourite, gaining 2.74% to R32.99.
Brait was 1.20% lower at R84.
by
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