JSE up 7% on the back of a bar­rage of stim­uli

Pretoria News - - BUSINESS REPORT -

THE JSE, after an­other week of un­prece­dented volatil­ity, traded more than 7 per­cent higher at mid­day on Fri­day as it tracked surg­ing global mar­kets that were re­act­ing to a bar­rage of stim­u­lus mea­sures un­leashed by cen­tral banks and gov­ern­ments to block the eco­nomic shocks from the coro­n­avirus.

The rally fol­lowed an­nounce­ments by the US Fed­eral Re­serve, Euro­pean Cen­tral Bank and Bank of Eng­land about big new in­jec­tions of funds into fi­nan­cial mar­kets. Gov­ern­ments have com­mit­ted tril­lions of dol­lars in new spend­ing and credit guar­an­tees to help sup­port their economies.

On the JSE, lo­cal sen­ti­ment was also boosted by Thurs­day’s 100 ba­sis point repo rate cut, and moves by the South African Re­serve Bank (SARB) to boost liq­uid­ity in the money mar­ket.

Out of the top 10 big­gest gain­ers on the JSE on Fri­day morn­ing, I chose to write about five that ar­guably present good de­fen­sive prop­er­ties to in­vestors, given the state of the mar­kets. The five are: Capitec, Sibanye-Still­wa­ter, Aspen, Dis-Chem and An­heuser-Busch InBev.

Capitec, pi­o­neer­ing pa­per­less bank and the big­gest bank by num­ber of cus­tomers, on Fri­day re­gained some of the 30 per­cent de­cline in the share price at one stage the day be­fore, and a 28 per­cent slide in share price on Wed­nes­day. The lower de­clines, a fea­ture of all the lo­cal banks, had been led by in­ter­na­tional in­vestors sell­ing in the wake of a weak­en­ing rand.

Capitec moved to as­sure in­vestors last week that it re­mained well cap­i­talised, and that only 1.1 mil­lion of its 12.6 mil­lion ac­tive clients had un­se­cured credit fa­cil­i­ties, with an in­creas­ing num­ber of clients in the mid­dle to higher-in­come cat­e­gories. The mar­ket ap­pears con­vinced.

With its roots firmly em­bed­ded in tech­nol­ogy from day one, and now with a size­able cap­i­tal base as bedrock – its ex­po­sure to eq­uity was con­ser­va­tive at around 21 per­cent at end Novem­ber – Capitec should ar­guably be in a bet­ter po­si­tion than the other big banks to ride out any op­er­a­tional im­pacts of the coro­n­avirus, and its ef­fects on clients.

An­other share to have ex­pe­ri­enced a wild ride in the past two weeks is the world’s big­gest plat­inum group met­als and gold miner, Sibanye-Still­wa­ter.

Its price has ben­e­fited from the group re­turn­ing to prof­itabil­ity at the end of last year from re­cent op­er­a­tional re­struc­tur­ing. It saw a 36 per­cent im­prove­ment by Fri­day in the rand gold price per ounce and higher plat­inum prices, as well as from in­vestor per­cep­tions around “safe-haven” in­vesta­bil­ity of pre­cious met­als, even though in­vestors were also sell­ing off gold hold­ings glob­ally last week.

On Fri­day af­ter­noon, the share was 11 per­cent higher at R18.35, but it was still 22 per­cent lower than the pre­vi­ous Fri­day’s close. It would be a brave per­son to spec­u­late about the gold price over the short term, but I doubt the sale of gold will cease.

An­other of the top 10 shares gain­ing strongly on the JSE on Fri­day morn­ing was Aspen Phar­ma­care, which was up as much as 12.95 per­cent.

Phar­ma­ceu­ti­cal pro­duc­ers, with their steady in­comes and well-reg­u­lated mar­kets have tra­di­tion­ally been viewed by in­vestors as de­fen­sive stocks and this per­cep­tion has taken on new depth with the coro­n­avirus out­break.

Aspen, which has al­ready seen a spike in de­mand for over-the-counter pain and flu prod­ucts, said last week it would ad­just pro­duc­tion at its plants to en­sure sup­plies of es­sen­tial medicines, such as an­tibi­otics, should South Africa’s Covid-19 out­break trig­ger a sud­den in­crease in de­mand.

It had also given the govern­ment an un­der­tak­ing to al­ter pro­duc­tion plans to en­able the pro­duc­tion of es­sen­tial drugs should the need arise.

Its share price was 7.93 per­cent higher on Fri­day af­ter­noon at R102.95, down only 5.7 per­cent through the gen­eral mar­ket melee of March 11’s R109.19. In the cir­cum­stances, the share price has proved re­silient.

An­other favourite de­fen­sive stock among South African in­vestors was Dis-Chem, which was 12.8 per­cent up on Fri­day morn­ing. The price had been trend­ing lower over three months, but was 11.5 per­cent higher at R25.97 on Fri­day af­ter­noon, bring­ing its gain over a week to 24.7 per­cent.

Apart from health and phar­ma­ceu­ti­cal prod­ucts, the com­pany also ben­e­fits from re­tail­ing per­sonal ac­ces­sory prod­ucts such as make-up, the sale of which typ­i­cally hold up well through eco­nomic de­clines.

An­other share I was not sur­prised to see in the top 10 gain­ers on the JSE on Fri­day was global beer and bev­er­age group An­heuser-Busch InBev.

It was up 14 per­cent to R701.19 on Fri­day af­ter­noon, only 2.3 per­cent lower than R717.70 the pre­vi­ous Fri­day. Beer drinkers drink beer when they are happy, and when they are sad…

ED­WARD WEST

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