Strong earnings give JSE a boost

Johannesburg - Earnings season is now in full swing, with strong earnings being reported by both domestically listed and international stocks.

US banking stocks continue to defy gravity and strong earnings out of JP Morgan and Goldman Sachs gave support to US banks that have continued their rally since the election of Donald Trump in 2016.

Positive effects of US tax cuts are beginning to be felt by some of the US companies as earnings begin to show a positive uptick.

The best was saved for last on the JSE, as the much-awaited Steinhoff International [JSE:SNH] annual general meeting (AGM) was held today at 13:00.

• READ: WRAP: Plain sailing for Steinhoff at AGM with all motions adopted

The global retailer had been on the upward trend ahead of the AGM, as investors eagerly anticipated positive news. From the AGM presentation it is evident that the business has had to sell down some of its assets to ease the liquidity constraints it has been facing since the disclosure of the corporate accounting malfeasance.

The positive extracts from the presentation were that the business continues to be a “solid” going concern aiming to focus on the overall group restructuring plan.  

SNH needs to get to a point where it no longer needs to sell off assets to sustain the businesses liquidity position. The business must be commended for its efforts to engage its creditors in their four debt clusters and their efforts to reassure investors. 

• READ: STEINHOFF TIMELINE: From 'Ikea of Africa' to near collapse in just four months

Real solid investor confidence will only return to the business when the investing public are convinced that the dark cloud that once hung above SNH has disappeared, and all litigation against the business has been dealt with. 

This may still take a while as management will only be able to release unaudited interim group results in June 2018, forming the basis to release full-year audited 2018 group results at the end of January 2019.

The market was relatively quiet in the first half of the day. However, the winners and losers of the day were Cashbuild [JSE:CSB] which gained 4.78%; Hammerson [JSE:HMN] was up 4.22% while Rebosis [JSE:REB] and Intu Properties [JSE:ITU] were up 3.23% and 3.22% respectively, giving the REITS something to smile about.

There was no Friday cheer for investors in Sun International [JSE:SUI], Tradehold[JSE:TDH], Datatec [JSE:DTC] and African Rainbow Minerals [JSE:ARI] as these shares fell 5.64%, 5.57%, 5.17% and 4.3% respectively.

The JSE Top-40 Index was flat on the day to close the week at 50 765, while the broader JSE All-Share Index was up 0.1% to trade at 57 581points. The Resource Index was down 0.43%, while the Industrial and Financial Index was up 0.23%.

This week’s performance on the JSE can only be described as a rollercoaster ride. Notable gainers for the week were Steinhoff International [JSE:SNH] up 20.83%, Pick n Pay Stores [JSE:PIK] up 11.76%, Car Track Holdings [JSE:CTK] up 11.76% and Mediclinic International [JSE:MEI] up 15.17%.

These gains were mainly triggered by strong earnings released this week. Double-digit moves were also recorded in Clicks [JSE:CLS], Netcare [JSE:NTC] and African Rainbow Minerals [JSE:ARI] notching up gains of 11.35%, 10.86% and 10.23% respectively.

Losses were sustained by JSE tobacco giant British American Tobacco [JSE:BTI], which slid 11.93%, while Metair [JSE:MTA], Intu Properties [JSE:INT] and Reinet [JSE:REI] shed 9.38%, 9.28% and 6.71% respectively.

The rand was softer today and was trading at R12.09 to the dollar at 17:00 CAT. The local unit lost ground against the greenback mainly due to a rebound in the USD today.

South African 10-year bond (R186) yields were higher today, closing at 8.04% up from 7.98% on Thursday. Yields on the benchmark R186 declined this week, moving down to as low as 7.8% on Thursday down from 8.07% last week Friday.

Bullion was weaker on the day as the dollar advanced in afternoon trade. The precious metal made a session low of $1 335 per ounce, having traded at $1 343/oz earlier in the session. At the time of writing, gold was trading at $1 337/oz.

At the time of writing, Brent Crude was changing hands at $72.74 per barrel, lower from Thursday's closing levels. This was after President Donald Trump tweeted that the prices of Brent crude were inflated as the market still had an oversupply of oil.