South African stocks remained modestly weaker at noon on Thursday, with banks weighing heavily on a deteriorating inflation outlook after worse-than-expected producer price inflation (PPI) data and the South African Reserve Bank governor’s comments that the bank was considering a 200-basis-point interest-rate hike.
At noon, the all-share index was off 0,18%, weighed by 2,92% and 2,02% drops in banks and financials respectively. Industrials gave up 0,23%. The gold-mining index tumbled 2,22% and the platinum-mining index lost 0,19%, while resources collected 0,34%.
The rand was bid at 7,62 to the dollar from 7,67 when the JSE closed on Wednesday, while gold was quoted at $893,93 a troy ounce from $898,37/oz at the JSE’s last close.
Banks dominated the loser board after Statistics South Africa data showed that PPI rose by 12,4% year on year (y/y) in April from a revised 11,9% y/y in March, and above the 11,7% the market had expected according to an I-Net Bridge survey.
“I think the debate during the next MPC [monetary policy committee] meeting will be the size of a rate hike. I hope they don’t go for 200 basis points,” said Fanie Joubert, an economist at Efficient Group.
“We had already priced in a negative number from PPI data, but sell-off escalated after [South African Reserve Bank governor Tito] Mboweni’s comments last night [Wednesday],” one equities trader said.
Mboweni said late on Wednesday that “drastic” measures needed to be taken to curb inflation, adding that the MPC had discussed the possibility of raising by 200 basis points.
“This is way above the upper limit — you don’t have to be a genius to tell interest rates have to tighten,” the central bank’s chief said on Wednesday night of the latest CPIX (consumer inflation less mortgage costs) figure of 10,4%.
Banking group Standard Bank sank R3,14, or 3,60%, to R84,11, a level last seen in October 2006. Nedbank fell R2, or 1,97%, to R99,50, Absa was down R2,49, or 2,90%, to a level last seen in July 2005 of R83,50 and FirstRand fell 30 cents, or 2,03%, to an almost four-year low of R14,49.
Other financial stocks were not spared, with Sanlam down 23 cents, or 1,16%, to R19,57, while RMB Holdings fell 51 cents, or 2,15%, to R23,25.
Dual-listed specialist banking group Investec Limited slipped R1,10, or 2,02%, to R53,40 and Investec plc was off R1,30, or 2,41%, to R52,60.
Among retailers, Woolworths plunged 43 cents, or 3,61%, to R11,48, Truworths dropped 67 cents, or 2,76%, to R23,64 and Foschini was off R1,19, or 3,31%, to R34,71.
Elsewhere, weakening metal prices that saw the bullion price dipping below the $900/oz level weighed on the mining sector. AngloGold Ashanti shed R6,53, or 2,24%, to R284,47, Harmony was down R2,14, or 2,28%, to R91,52 and Gold Fields dropped R1,54, or 1,51%, to R100,16.
Platinum miner Anglo Platinum was down R13,24 to R1 361,76 and Impala Platinum eased 45 cents to R338.
Diversified mining group Anglo American bucked the weaker tone in the sector, gaining R2,50 to R533 and BHP Billiton added R2 to R300,45.
Synthetic fuels maker Sasol was up R9,21, or 1,94%, to R483,34 as Brent crude held steady at $130 per barrel.
Among industrials, brewer SABMiller tumbled R5,01, or 2,54%, to R192,50, Tiger Brands lost R3,02, or 1,88%, to R157,88 and Bidvest was R1,13, or 1,02%, in the red at R109,87. — I-Net Bridge