JSE opens flat as traders keep watchful eye on rand and oil

The JSE opened flat on Wednesday in cautious trade as the market tried to gauge the effect of a weaker rand and higher oil prices on the market.

Platinums led at the opening while banks and retailers lost ground. Property stocks were flat.

Higher oil prices and a weaker rand will result in further petrol price hikes, which could see inflation breaching the top end of the Reserve Bank’s 3%-6% target range. The Bank is likely to raise interest rates by 25 basis points before the end of 2018.

The rand, along with its emerging-market peers, was on the back foot on Wednesday morning, and this scenario is likely to continue in the short term, analysts at Nedbank Corporate and Investment Banking said.

“Locally, the focus is on the price of fuel and its possible knock-on effects, with the Reserve Bank warning that the risk of CPI inflation exceeding 6% should not be underestimated,”  they said.

Brent crude breached $85 a barrel again on Wednesday, while the rand was at R14.3530 to the dollar, unchanged from overnight levels, after weakening to R14.4293 earlier. It was at R14 last week.

Higher inflation would affect banking and retail stocks more than those companies with an external focus, known as the rand hedges. Rand hedges and miners could benefit from a weaker rand over the longer term.

The Dow closed 0.46% up on Tuesday. The Nikkei 225 was down 0.66% and the Hang Seng lost 0.17% on Wednesday.

At 9.48am the all share was 0.01% up at 55,480.30 points and the top 40 has lost 0.04%. Platinums rose 2.27%, food and drug retailers 0.15%, and property 0.05%. Banks lost 1.36%, general retailers 0.6% and financials 0.44%.

Sasol rose 0.6% to R565.

British American Tobacco was down 0.75% to R657.06.

FirstRand shed 2.64% to R63.48.

Construction company Group Five rose 4.59% to R1.14.

In the property sector, Greenbay Properties tumbled 37.24% to 92c. It was not immediately apparent what caused the fall in the share, which is part of the Resilient stable.

EOH lost 2.48% to R34.61. The group reported on the day that normalised revenue came in at R16.27bn from R15.1bn in the year to end-July.

Naspers was 0.51% higher at R3,015.19.

Aspen Pharmacare was 2.36% lower at R166.45.