Weak metal prices hit mining shares

THE JSE suffered a fairly steep drop this week while the rand held near-record lows to the dollar, stepping up pressure on the Reserve Bank as it gears up to deliver its decision on interest rates on Thursday.

The All Share index finished 3.33% weaker on the week at 51 199.34 points, in line with global equity markets.

The losses on the domestic market were mainly concentrated in the resources sector, followed by financial shares.

Anglo American briefly dipped below R100 a share for the first time in 15 years amid the renewed slump in commodity prices such as platinum and copper.

Market bets of higher interest rates in the US next month lifted the dollar, which makes commodities priced in the US unit expensive for buyers holding weaker currencies.

“Blood-letting in commodities was the story of the week. Some investors are sitting and wondering as to how long some of these miners can survive in this tough environment without fresh rounds of capital rising,” said Ryan Wibberley, head of dealing for emerging markets at Investec Asset Management.

The JSE resource index slid to its lowest level since 2005 and booked its fifth weekly loss in a row. Anglo was off 11% at R99.21, with African Rainbow Minerals dropping 21.85% to R44. Kumba Iron Ore 24.80% to R43.85.

Excess supply and weak demand is another challenge facing mining companies as the world economy muddles along.

This week, the Organisation for Economic Co-operation and Development trimmed its 2015 global growth forecast to 2.9%, pointing to a slowdown in emerging market economies and world trade.

Momentum SP Reid Securities analysts said in a note that mining shares were “exceptionally oversold” and offered short-term trading opportunity.

The financial 15 index settled 5% weaker, with the heavily weighted industrial sector dropping 2%.

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