Johannesburg - As the world came to terms with Donald Trump’s election as the 45th president of the United States, South African mining stocks rallied yesterday as safe-haven buying went into overdrive.
Trump’s presidency is tantamount to sailing into unchartered waters, hence the search for asset classes viewed as safe havens. Gold and resource stocks yesterday led the increase in prices on the JSE.
The rand, however, slumped along with other emerging market currencies. Yesterday morning, the currency lost as much as 4 percent, compared with the US dollar. At 2pm, the rand was R13.49 to the US dollar. By close of markets yesterday, it was R13.5898 to the US dollar.
“Emerging markets currencies struggled across the board with the rise in uncertainty and safe-haven seeking behaviour by investors. Similar to the rise in the gold price, we expect the rand-depreciation to be a knee-jerk reaction and for the South African currency to claw back losses over coming sessions,” Hanns Spangenberg, a senior economist at NKC African Economics, said yesterday.
The Top40 index closed at 44 494.27, up 0.67 percent. The JSE mining index closed at 25 249.68 points, up by 6.29 percent. BHP Billiton’s share price rose 8.1 percent to close at R222.69; Anglo American shares were up 5.06 percent at R198.05, and Glencore shares rose 9.32 percent to close at R44.59 on the JSE yesterday.
Spangenberg said, going into the US presidential election, a Trump victory was assumed to be market-negative. But as the results started to trickle in, with a Trump victory seeming all the more likely, investors sought safe-haven destinations like gold.
“We expect to see some consolidation in coming days, not unlike in the wake of Brexit. However, the impact of a Trump victory will likely be more marked and lasting than seen during Brexit, given the much larger influence of developments on world markets in the US.”
Shock outcome
MMI Investments and Holdings head of investment research and asset allocation, Herman van Papendorp and economist Sanisha Packirisamy said yesterday that the shock outcome to the US presidential race had roiled global financial markets. They said Americans had elected an anti-establishment candidate “with an implicit mandate to change the policy status quo”.
Van Papendorp and Packirisamy said that there was a plethora of political events scheduled to take place in Europe, where broad voter bases that felt deeply disenfranchised by incumbent systems could express their dissatisfaction by voting in an unconventional way. These included next year’s general elections in the Netherlands, France and Germany.
“One of the main results of the escalating discontent among the voter bases of developed countries has been the rise of nationalistic tendencies at the expense of internationalism,” they said. Should the transition from globalisation to protectionism materialise in the coming years, it was likely to be accompanied by increasing uncertainty.
While Trump’s economic policies were largely unknown, those that he had outlined suggested increased vulnerability for emerging markets and that US self-interest could dominate, Van Papendorp and Packirisamy said.
Peter Brooke, the head of Old Mutual Investment Group’s MacroSolutions Boutique, said yesterday that the world was entering a new, populist-led era, which could result in a pull back from globalisation.
BUSINESS REPORT