JSE set for mixed start on Tuesday as EOH gives update on probe

The JSE could open mixed on Tuesday, taking its cue from Asian markets, while technology group EOH is expected to provide feedback on a probe into its dealings with the state.

US stocks edged slightly higher overnight to reach fresh records, with Citigroup kicking off reporting season with better-than-expected profits.

Meanwhile, US officials said they may travel to China for face-to-face trade talks, days after China reported its slowest rate of economic growth in nearly three decades partly because of the trade spat between the two countries.

Financial markets have reacted to the economic slowdown with “relative calm” amid heightened speculation for further policy stimulus in the world’s second largest economy, analysts at Singapore’s OCBC Bank said in a note.

Asian markets were mixed on Tuesday.

China’s major stock indices were slightly lower, while Hong Kong’s Hang Seng Index was flat. Japan’s Nikkei 225 was 0.7% lower, though Korea’s Kospi added 0.2%. Australia’s main benchmark was flat.

Chinese internet and gaming company Tencent rose 0.7% in Hong Kong, suggesting a positive start for major shareholder Naspers, which is Africa’s biggest public company, thanks to that investment.

JSE-heavyweight BHP Group was 0.6% higher in Australia.

While no major company results are expected locally on Tuesday, EOH is due to provide feedback to the market on ENSafrica’s review of all the technology company’s large, historical licensing contracts with the state.

This comes as EOH, led by new CEO Stephen van Coller, takes measures to restore its reputation — and market valuation — following concerns about its government contracts.

Microsoft recently cut ties with the technology company, allegedly because of a tip-off about a contract it had with SA’s defence department.

EOH said early on Tuesday, ahead of a presentation to investors, that “suspicious transactions” worth R1.2bn had been identified and are being investigated by ENSafrica.

“The exact nature of each of these transactions has not as yet been verified and may relate to legitimate transactions, theft or bribery and corruption payments,” it said.

Meanwhile, the SA Reserve Bank’s monetary policy committee will meet on Tuesday. The Bank is due to announce its latest interest rate decision on Thursday amid growing expectations that local interest rates will be cut as major economies do the same.

“The local interest rate decision due on Thursday is likely to have only a short-lived, and muted, weakening effect on the rand,” said Bianca Botes, treasury partner at Peregrine Treasury Solutions.

“The tone of the monetary policy committee and Fed will, however, play an important role in determining interest rate strategies for the rest of the year,” Botes said.

The rand was flat on Tuesday morning at R13.90/$, R17.39/£ and R15.65/€.

Investors will keep an eye on US retail sales and industrial and manufacturing production data due later in the day, as well as employment and earnings data in the UK and trade figures from the EU.

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