CAPE TOWN - The JSE, after another week of unprecedented volatility, traded more than 7percent higher at midday on Friday as it tracked surging global markets that were reacting to a barrage of stimulus measures unleashed by central banks and governments to block the economic shocks from the coronavirus.
The rally followed announcements by the US Federal Reserve, European Central Bank and Bank of England about big new injections of funds into financial markets. Governments have committed trillions of dollars in new spending and credit guarantees to help support their economies.
On the JSE, local sentiment was also boosted by Thursday's 100 basis point repo rate cut, and moves by the South African Reserve Bank (SARB) to boost liquidity in the money market.
Out of the top 10 biggest gainers on the JSE on Friday morning, I chose to write about five that arguably present good defensive properties to investors, given the state of the markets. The five are: Capitec, Sibanye-Stillwater, Aspen, Dis-Chem and Anheuser-Busch InBev.
Capitec, pioneering paperless bank and the biggest bank by number of customers, on Friday regained some of the 30percent decline in the share price at one stage the day before, and a 28percent slide in share price on Wednesday. The lower declines, a feature of all the local banks, had been led by international investors selling in the wake of a weakening rand.
Capitec moved to assure investors last week that it remained well capitalised, and that only 1.1 million of its 12.6 million active clients had unsecured credit facilities, with an increasing number of clients in the middle to higher-income categories. The market appears convinced.
With its roots firmly embedded in technology from day one, and now with a sizeable capital base as bedrock - its exposure to equity was conservative at around 21percent at end November - Capitec should arguably be in a better position than the other big banks to ride out any operational impacts of the coronavirus, and its effects on clients.
Another share to have experienced a wild ride in the past two weeks is the world's biggest platinum group metals and gold miner, Sibanye-Stillwater.
Its price has benefited from the group returning to profitability at the end of last year from recent operational restructuring. It saw a 36percent improvement by Friday in the rand gold price per ounce and higher platinum prices, as well as from investor perceptions around “safe-haven” investability of precious metals, even though investors were also selling off gold holdings globally last week.
On Friday afternoon, the share was 11percent higher at R18.35, but it was still 22percent lower than the previous Friday’s close. It would be a brave person to speculate about the gold price over the short term, but I doubt the sale of gold will cease.
Another of the top 10 shares gaining strongly on the JSE on Friday morning was Aspen Pharmacare, which was up as much as 12.95percent.
Pharmaceutical producers, with their steady incomes and well-regulated markets have traditionally been viewed by investors as defensive stocks and this perception has taken on new depth with the coronavirus outbreak.
Aspen, which has already seen a spike in demand for over-the-counter pain and flu products, said last week it would adjust production at its plants to ensure supplies of essential medicines, such as antibiotics, should South Africa’s Covid-19 outbreak trigger a sudden increase in demand.
It had also given the government an undertaking to alter production plans to enable the production of essential drugs should the need arise.
Its share price was 7.93percent higher on Friday afternoon at R102.95, down only 5.7percent through the general market melee of March 11’s R109.19. In the circumstances, the share price has proved resilient.
Another favourite defensive stock among South African investors was Dis-Chem, which was 12.8percent up on Friday morning. The price had been trending lower over three months, but was 11.5percent higher at R25.97 on Friday afternoon, bringing its gain over a week to 24.7percent.
Apart from health and pharmaceutical products, the company also benefits from retailing personal accessory products such as make-up, the sale of which typically hold up well through economic declines.
Another share I was not surprised to see in the top 10 gainers on the JSE on Friday was global beer and beverage group Anheuser-Busch InBev.
It was up 14percent to R701.19 on Friday afternoon, only 2.3percent lower than R717.70 the previous Friday. Beer drinkers drink beer when they are happy, and when they are sad.