JSE dodges Turkish contagion as miners and industrials gain on weaker rand

Despite the turmoil in Turkey and its resulting global contagion, the JSE started the week on a positive note, as a weaker rand supported miners and industrial stocks.

Trading was choppy for much of the day, but accelerated towards the close, resulting in turnover of about R15.6bn.

Food and drug retailers fared well, but banks and general retailers closed lower. Platinums were sold off, with the metal price having shed more than 2.5% by the close.

The market was supported in late trade by a positive opening on the Dow, while European markets were mixed for most of the day, with the euro staging a comeback after recording sharp losses against the dollar in the previous two sessions.

Turkey’s failure to properly address its economic problems, however, remained a drag on the lira’s recovery, with the unveiling of an economic stability plan by finance minister Berat Albayrak having little effect.

Turkey is especially vulnerable because of its high level of hard-currency debt, which becomes more and more difficult to service as the lira depreciates. Investors are also concerned about the central bank’s ability to react, by, for example, raising interest rates, given that President Recep Tayyip Erdogan has put measures in place that could curb its independence, Dow Jones Newswires reported.

SA’s situation is different from that of Turkey and although the rand slumped along with the lira, investors “should differentiate them”, said Old Mutual Investment group analysts Dave Mohr and Izak Odendaal.

SA’s deep, liquid capital markets and well-capitalised banking system means that most borrowing is done locally, and therefore a weaker rand should not lead to a debt crisis, they said. Rather than being too accommodative, the South African Reserve Bank fiercely guards its independence and is determined to maintain inflation within its target range. Turkey’s inflation rate is 16%, compared with SA’s 4.6%.

“But SA is an emerging market and anything that upsets investor sentiment towards emerging markets will influence domestic markets,” said Mohr and Odendaal.

The all share closed 0.32% higher at 57,885.30 points and the top 40 rose 0.47%. Resources gained 1.2%, food and drug retailers 0.55% and industrials 0.4%. Platinums dropped 2.1%, banks 1.58%, general retailers 1.13% and financials 0.62%.

Anglo American jumped 3.43% to R307.50 and BHP 2.03% to R309.69.

Anglo American Platinum fell 3.59% to R408.46.

FirstRand lost 3.52% to R63.05 and Absa 1.3% to R160.25.

Discovery rose 1.11% to R165.63 but Liberty Holdings lost 1.16% to R115.87.

Shoprite rose 1.26% to R215 but Woolworths slipped 0.44% to R49.84.

Naspers added 0.99% to R3,405.

Sappi plummeted 9.51% to R91.30 after earlier saying third-quarter net debt rose to $1.6bn from $1.31bn in the year-earlier period, while profit slipped from $58m to $51m.