Abil drops sharply in a lacklustre market

SOUTH African share trading was flat on Friday for a second successive session, but African Bank (Abil) plunged after a negative rating from Moody’s.

Moody’s cut its international rating on Abil to below investment grade, or “junk”, citing concern about spiralling bad debt. This sliced nearly 7% off its share price.

Abil, which owns furniture retailer Ellerines, said it did not expect dramatically higher funding costs after the downgrade.

“The big noose around their neck is obviously Ellerines,” said Ron Klipin, portfolio manager at Cratos Wealth.

“We have seen what has happened to the other furniture guys.”

Abil said earlier this month that Ellerines was expected to book a loss of up to R1.3-billion in the first half of this year as customers scaled back on purchases.

Abil fell 6.77% to R8.40 to become the biggest decliner among companies listed on the Johannesburg Stock Exchange’s Top 40 index.

The benchmark Top 40 index was down 0.23% at 44 641.55 while the wider All Share index dipped 0.19% to 49 632.70.

Commodity prices, including those of iron ore and gold, fell as a result of soft demand from Asia and oversupply.

Three of the world’s top platinum producers have been badly affected by the mine strike, now in its 19th week, that has cut almost half of global production, and collectively lost them more than R20billion.

The platinum mining index fell 0.9% while the gold index rose 0.9%.

Global equity markets edged slightly lower as fear that growth expectations may be too high offset mostly solid economic data.

Wall Street fell, and a measure of global equities slid after hitting its highest level in more than six years on Thursday, though that was still 2% below its lifetime high.

US consumer spending fell for the first time in a year in April, but the decline, which followed two months of solid gains, did not change expectations for a sharp rebound in economic growth this quarter.

MSCI’s all-country world equity index fell 0.2% while the FTSEurofirst 300 index of leading European shares closed down 0.1% at 1 377.46.

The Dow Jones industrial average fell 0.18% to 16 668.72.

The S&P 500 lost 0.09% to 1 918.37, and the Nasdaq Composite dropped 0.4% to 4 230.839.

Brent crude was down 50c at $109.47 a barrel.

Spot gold was down 0.3% at $1 251.25/oz at 1401GMT, having earlier hit a low of $1 250.20, its lowest since early February.

Silver was down 0.3% at $18.91/oz. Spot platinum rose 0.1% to $1 454.49/oz. Spot palladium was up 0.2% at $832.50/oz. — Reuters