Money and Markets

The JSE just had its best first quarter in 12 years – despite meltdowns in Aspen, Mr Price, and Shoprite

Business Insider SA
Source: Johann Biermann
  • The first quarter of the year was painful for investors in many companies which make their money from SA consumers: Mr Price, Shoprite, and Woolworths saw large falls.
  • The pharmaceutical company Aspen lost almost a third of its value amid investor concerns.
  • But, thanks in part to rallying mining shares, the JSE's all share index saw a solid gain in the first three months of 2019.

Despite painful declines in some of its biggest listings, the South African stock market had a great start to the year – in part thanks to booming mining shares.

The JSE’s all share index rose by more than 7% in the first three months of 2019. This is the best first-quarter performance since before the financial crisis, says independent analyst Johann Biermann. In 2007, it gained almost 10% during the same time.

Last year, the JSE lost almost 7% in the first quarter.

The JSE is still 8% below the record high of 61,685 points it reached in January last year. It is also not keeping up with other emerging markets. In the first quarter of the year Egypt (+19%), Brazil (7%), Mexico (6%) and India (5%) all gained more than the local market (almost 4%) in dollar terms.

Year-to-date performance of exchange traded funds which reflect the markets of each country (in dollar). Source: Schalk Louw

Biggest winners

Mining companies were the biggest winners in the first quarter. This was in part due to a rocketing palladium price.

Palladium reached record highs in recent months amid a shortage of the metal, which is used by car makers to manufacture catalytic converters. These devices are fitted behind exhausts, and convert damaging pollutants into less harmful gasses and water vapour.

South African mines are among the only ones in the world that produce palladium.

Implats rocketed a massive 66% over the past quarter, while Amplats is up 37%.

jse win
Source: Schalk Louw

A repeat performance is not expected: palladium slumped by 11% in the last week of March, and analysts surveyed by Bloomberg last week saw the metal ending the year around its current levels.

Other mining star performers included Sibanye (+66%) and Kumba (+52%).

Biggest losers

It was a disastrous quarter for pharmaceutical company Aspen.

The company lost almost a third of its value amid market concerns about delays in a key deal to sell its infant formula business to the French-based company Lactalis. The deal is expected to earn it €635 million.

Aspen’s total debt burden has now reached R53.5 billion, which is more than its market value. And most of the debt is in “hard” currencies like the euro – while the bulk of its sales are in emerging markets, which typically have weak and unstable currencies.

jse lose
Source: Schalk Louw

South African retailers had a tough time as the weak economy hit consumer demand: Mr Price fell 23%, followed by Shoprite (-17%), Woolworths (-16%) and Spar (-8%). 

Vodacom (-16%) was another big loser as its revenue came under pressure.

Sappi (-18%) continued to fall amid weak demand for its products in Europe and increased spending on new factories.

For more, go to Business Insider South Africa.

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