Five shares: Give your portfolio a boost with metals
Fears of a second surge in the spread of coronavirus in the US and weak economic data for that country and the global economy have let the bears loose in global markets.
The result last week was that global investors dumped riskier assets, which together with the release of the worst domestic business confidence index level on record, meant the rand depreciated sharply on Thursday, along with other emerging market currencies. The local currency regained some strength, very marginally, on Friday.
The All Share Index was at 53 185 on Friday morning, down from 54 722 points a week before. The index firmed less than 1 percent later in the afternoon, the index had surged in tandem with global markets in recent weeks – it was only at 50 074 on May 25.
Fears of a resurgence of Covid-19 have arisen because the number of infections in half of the US states have started to increase again as lockdown restrictions ease, while mass testing has also resumed in Wuhan, China, where the disease is believed to have originated, and in South Korea, where weeks ago, the country was celebrating its gains against the virus.
Also alarming were reports that while business had resumed in most respects in China, which came out of strict lockdown restrictions far earlier than other countries, consumer spending has remained muted. This is an indicator of what demand will be like in other countries as lockdowns ease, including in South Africa.
It indicates that consumer spending is not likely to recover very fast. This is particularly bad news for South Africa, an economy that derives more than 60 percent of GDP from consumer spending. And it is still months from when virus infections are expected to peak in the country.
It would appear important, at this stage, to include metal commodities in a share portfolio, given the steadier nature of their demand and supply factors in the economy, and notwithstanding the traditional volatility of commodity spot prices.
Multinational metals group Anglo American was up 2.14 percent to R390.83 on Friday morning, but the price had plateaued last week – it was trading at R396.49 a week before – after a rally since March. The price was likely driven by the firming platinum price and rand weakness – the rand per ounce of the metal was up 1.29 percent about midday on Friday. Rising gold futures prices point to firmer precious metals prices.
The share price of another multinational commodities group on the JSE, Glencore was, up strongly by 3.27 percent to R37.60 by Friday. Similarly, the price of mineral, metals and petroleum company BHP Group was up 3.37 percent to R37.60.
Two multinational behemoths in the movement of goods were among the biggest losers on the JSE on Friday, not surprising given the bleak economic outlook.
Barloworld, which has its Avis Fleet rental business up for sale, fell 4.74 percent to R75.08 after it warned of a decline of 25-36 percent in normalised headline earnings per share for the six months to March 31.
Imperial Group, a mover of goods in 32 countries, was down 4.5 percent to R41.59 on Friday. Presumably if consumers are buying less, there will be less products required to be moved.