South African Shares Jump as Rate Jitters Discounted

Posted 06 October 2006 @ 07:06 am EET     Print     Reprint     E-Mail     Comments

JOHANNESBURG (Reuters) - South Africa's Liberty lit up local shares on Thursday, leading a cross-sector rally fuelled by stronger global markets on the back of easing inflation and interest rate jitters.

"There's fresh buying as people seek value in some heavily sold shares and this is on the back of falling oil prices, which means people are talking down global inflation fears," said Ferdi Heyneke, portfolio manager at Afrifocus Security.

"The Dow (Jones) was up quite sharply last night and Hong Kong and Japan followed suit today so that momentum has carried our market as well," Heyneke said.

He said on the local scene, investors had discounted the fact that interest rates are expected to rise by 50 basis points after next week's central bank meeting and said the market would only react negatively if the increase was more than that.

The blue-chip Top-40 index rose 0.47 percent to 20,589.18 points, while the All-share index added 0.48 percent to 22,475.14 points.

Local insurance, bank, industrial and retail stocks leapt, after taking a beating in the run-up to next week's interest rate decision but were now finding renewed interest.

Liberty rose 4.55 percent to 74.86 rand, packaging firm Nampak added 2.96 percent to 19.10 rand and Standard Bank led the sector up 1.64 percent to 80 rand.

The bank was helped by news that it had secured a three-year $600 million syndicated loan aimed at diversifying some exposure away from the local market investor base.

Among retailers, Pick'n Pay added the most, rising 1.74 percent to 29.20 rand after recent declines.

"We saw foreigners come into local shares in which they were light-weight, mainly banks, industrials and retailers," Investec Asset Management's Kevin de Villiers said.

"Harmony was bullet-proof despite a downgrade, showing there is appetite in the share, after the sector stocks took a knock recently when the gold price slid."

Harmony was the biggest climber among blue-chip mining shares, up 4.14 percent to 107.80 rand.

This was despite a down-grade by Fitch owing to its continued loss-making performance. The down-grade to Long-term BBB(zaf) was by a single-notch owing to a perceived improvement in liquidity if it sells its stake to Western Areas, which rival Gold Fields is in the process of acquiring.

Gold Fields added 0.93 percent to 139 rand as gold drifted higher to trade above the previous day's 15-week low.

Healthcare group Netcare was the worst performer on the day, down 2.35 percent to 12.06 rand as foreign investors off-loaded on the stock, following a strong run powered by rumours of further offshore deals, De Villiers said.

The group recently secured lucrative contracts after buying into a UK-based health group, whetting investors' appetite for more similar deals.