MONDAY, 6.30PM:
THE Johannesburg Stock Exchange started the week on its back foot on Monday, with the all share index dropping 3% in early trade. All eyes were on the interest rate, which, floated by the Reserve Bank on Friday, rose further to 23,985% from 20,377% on Monday prompting fears of further bank prime rate rises.
Deutsche Morgen Grenfell head of trading Chris Wilde said that, while the South African market was under the same pressure it closed on last week, the keenly anticipated G7 meeting on the weekend had delivered “soft” results which did little to inject morale. Emerging markets were holding out for the weekend meeting, expecting Japan to deliver some direction. With direction not forthcoming, Wilde said, the yen weakened sharply on Monday, while the dollar climbed in early trade. A weak Deutschemark with the announcement that the International Monetary Fund is withholding its loans to Russia, pushed the dollar up further, providing an intimidating backdrop for the battling rand.
Barnard, Jacobs, Mellet dealer Echardt van der Hoven described the market as under continuing pressure which followed a hike in the repo rate.
Summing it up, Wilde said: “Noting is really going for us at the moment.”
By close of trade at 4.00pm the all share index was 235,7 points down at 6684,2. Financial shares led the charge, with the financial index losing 4%, 517,2 points, to close at 11887,1, while the industrial steadily dropped 270,6 points to close on 8024,0. The all gold index shed 12 points to 807,4 as gold shares saw little interest despite a slight firming of the bullion price.
South African bonds ended at their weakest level since the October 28, 1997 emerging market blow-out. The key government R150 bond passed the 15% yield, a softening which triggered stop-loss selling on the JSE. When the JSE closed at 4.00pm the R150 was yielding 15,130%–a loss of 44 basis points. The R153 ended a disastrous day on a 15,165% yield, off a previous close of 14,750%.
The rand touched its latest record low of R5,5500 to the dollar in early trade, but held steady at R5,5300 for most of the day. Dealers indicated that Monday’s further repo rate increase had failed to fight off speculators and put the local currency in a better position, and had succeeded in merely injecting a fresh round of panic into the market. At 4.00pm the rand stood at R5,5350 to the dollar, and R9,2782 to the pound.
BUSINESS BRIEFS
BLACK GROUP GETS COMAIR SHARE
BLACK empowerment group Co-ordinated Network Investments has won a fiercely contested 9,5% stake in soon-to-be listed airline, Comair, managing director Piet van Hoven announced on the weekend. The 9,5% stake is worth an estimated R95-million. The listing is in terms of an agreement with 28,5% shareholder, Gensec NSA Equity fund, which stipulates that management will eventually hold 37%, Gensec 17%, employees 5%, institutions and the public 19%, and other shareholders 12,3%.
BoE ENDS “N” SHARES
FINANCIAL services group Board of Executors Corporation, the holding company of the BoE Group, at the weekend dismantled its “N” share structure, a move which could lead to the company listing offshore. In terms of the announcement, “N” shares will be converted into ordinary shares by June 30, 1999, giving all shareholders equal voting rights in the group. Analysts have speculated that the change in voting structure, in line with the international standard of stopping non-voting or limited voting rights, could signal a subsequent increase in offshore activity.
BUSINESS BRIEFS
WITS TO CHARGE IN DOLLARS
WITS University is to charge students not residing in the Southern African Development Community in dollars from next year. Wits’ move comes in response to government plans to withdraw its subsidies to undergraduate SADC students, while other international students will remain subsidised. Wits has approximately 800 international students, of whom 100 are from outside the SADC. Academic registrar Derek Swemmer explained that international students do not contribute to the South African tax base. When the government withdraws its subsidies, this will result in universities losing income. Wits will therefore charge undergraduate students a flat $7500 fee in order to recover some of the lost subsidy income.
PUBLIC SERVICE TALKS CONTINUE
NEGOTIATIONS between government and public service unions over government’s alleged unilateral withdrawal from a three-year wage deal will continue on Tuesday. On Friday more than 4000 members of the Public Servants Association marched on the public service and administrative department offices in Pretoria, after the PSA and other public service affiliated unions agreed to settle for an arbitration against government as late as September. Unions allege that government only provided R3,37-billion for wage increase this year, instead of the agreed R4,8-billion.
FEARS OVER SA TITANIC
A NUMBER of commentators have raised concern over the viability of RMS Titanic Holdings’ plans to build an exact replica of doomed oceanliner, the Titanic, in Durban Harbour. Negative sentiments over the plan range from arguments that South Africa has not proved popular as a tourist attraction of late, to depressed demand in the shipping industry, to Durban’s lack of capacity to accommodate the requisite infrastructure. RMS CEO Sarel Gouws, however, argued that some of the revenue will be generated on the ships maiden millennium cruise. He added that the major source of revenue will be from United States markets, making it an attractive investment opportunity for both local and international investors. RMS has signed a dollar-based loan agreement of R2,6-billion with United Kingdom-based Sunray Development.
ASBESTOS SUMMIT CALLED
ENVIRONMENTAL affairs committee chairperson Gwen Mahlangu on Monday called for an asbestos summit to formulate policy on asbestos issues facing South Africa. The summit needs to look at studies that exposure to asbestos can result in asbestosis, lung cancer and incurable lung diseases, she said. The group also needs to look at rehabilitation and compensation for those who have been exposed to asbestos.
SIEMENS GETS UGANDAN ORDER
SIEMENS Mobile Network on Friday received an order, worth an estimated R2,5-million a year, to export community phone units to Uganda. Siemens Mobile Networks head Paul McKibbin said that the Ugandan order is the first export order for the community phone technology developed in Pretoria.
STANDARD HIKES RATES AGAIN
STANDARD Bank wasted little time in increasing its prime lending rate to 21,25% on Friday. Standard Bank’s announcement came just hours after the repo rate shot up 3,37% to 20,337%. The bank said it is still considering an increase in its home loan rates.