Stronger rand hits overseas earners

THE JSE struggled to find traction this week, with a stronger rand taking the shine off the big stocks that get most of their income from overseas.

The local currency touched R12.90/$ for the first time since August 2015, holding back some industrial and resource shares.

But momentum in a broader local share market has waned, after a blistering start to the year during which the All Share index gained up to 5% in January, a return that exceeded 2016’s as a whole in rand terms.

The rally in January partly mirrored buoyant global markets that took on board Donald Trump’s promises of fiscal stimulus after he took office as US president. But analysts at Momentum SP Reid Securities cautioned this week that political hurdles the Trump administration would face in executing its fiscal and tax programme would ultimately undermine the outcome of these initiatives.

The All Share settled 0.88% lower at 52 223.50 points on the week as resource 10 and industrial 25 indices shed 2.65% and 1.46%.

There were notable outliers, though, particularly in the industrial sector, which is home to retailers. Truworths shares rose 10% on its interim results. KAP Industrials, the biggest shareholder of which is Steinhoff International, rallied 15% following its interim results.

Banking stocks managed to keep their heads above water despite a storm of criticism following the Competition Commission’s finding that some of the banks had been involved in the manipulation of foreignexchange markets.

Figures released this week showed local consumer inflation at 6.8% annualised in January after December’s 6.6%.

NKC Research analysts said that dismal domestic growth prospects, a stronger rand and moderating inflation should continue to support an unchanged interest-rate stance by the Reserve Bank this year.

The bank expects inflation to return to its 3%-6% target range in the fourth quarter of this year.