The shares of MTN Group and Sasol muscled higher on the JSE yesterday.     Bloomberg
The shares of MTN Group and Sasol muscled higher on the JSE yesterday. Bloomberg

Sasol becomes a big beneficiary of rise in crude, as deal in price war beckons

By Dineo Faku Time of article published Apr 3, 2020

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JOHANNESBURG - The shares of MTN Group and Sasol muscled higher on the JSE yesterday after the oil price gained the most in two weeks amid optimism that the bruising price war between Saudi Arabia and Russia could soon be resolved.

Brent crude oil prices surged to close 5.52percent higher at $26.95 (R485.62) a barrel after US President Donald Trump said that he was expecting a deal between Russia and Saudi Arabia to end the price war.

In intraday trade MTN’s shares jumped 16.59percent to R50.74 a share (closing at R49), while Sasol’s shares rose 13.01percent to R38.13 a share (closing at R41).

Lester Davids, trading desk analyst at Unum Capital, said Sasol was a direct beneficiary of a rising oil price.

“That being the underlying commodity, which is a large driver of its revenue and earnings", he said. Sasol, whose cash break-even oil price is currently $35 a barrel, told investors last week that it had put hedges to cushion the impact of the weak oil environment and the uncertainty around the spread of the coronavirus.

Davids said the surge in the share price of MTN had to be viewed in the context of the preceding share price plunge.

“Over the past eight weeks, the share declined by close to 65percent on the back of global risk off concerns as well as the precipitous plunge in oil.

"The recent recovery is attributable to the surge in oil, which benefits Nigeria, which is the biggest revenue generator for the group,” he said.

MTN Nigeria boasts 61.1million customers, and Nigeria is the largest oil and gas producer on the continent.

Other stocks that jumped on the JSE yesterday included Exxaro Resources, which in intraday trade increased by 9.08percent to R109.41, Redefine was up 8.55 percent to R2.54 and Investec plc was 8.06 percent higher at R33.91.The All Share index closed the day 3.04percent higher at 45060.69points.

In contrast, the rand’s slippery slope continued as by 5pm it was trading at R18.49 to the greenback.

Bianca Botes, an executive director at Peregrine Treasury Solutions, said the rand yesterday had continued to deteriorate, following the downgrade of South Africa’s largest banks, coupled with the continuous sell-off of emerging-market assets.

“The sell-off is driven by uncertainty surrounding the Covid-19 outbreak and the anticipated global recession it will cause,” said Botes.

Investment banks and hedge funds are shying away from emerging market assets as they fear that these countries have not yet felt the full impact of the coronavirus.

The rand in the first quarter has lost around 30.4percent of its value and is the world’s worst emerging market currency.


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