JOHANNESBURG - The weakening rand and bullish performance from gold mining and resources stocks yesterday pushed the JSE’s all-share index above the 60 000 points mark for the first time in the bourses nearly 130 years history.
The index reached the record high of 60 140.33 points in before retreating to 59 975.67 at the close of trade as rand hedges pulled the market higher. The all-share index was swiftly followed by the benchmark top 40 index which also hit a record 53 740.77 before correcting to 53 563.68 at the close of business yesterday.
The stock market has been on an upward trend since the second half of the year, with the all-share flirting with the elusive 60 000 mark for most of October on the back of resources which had a strong run last month returning 7 percent on the back of a 22 percent rebound in platinum miners and an 8 percent gain by the general miners.
Dave Mohr, chief investment strategist at Old Mutual Multi-Managers, said October was a very strong month for local equities, despite elevated political uncertainty following another cabinet reshuffle and a disappointing Medium Term Budget.
“The FTSE/JSE All Share (Alsi) Index followed global markets higher and benefited from a weak rand, returning 6.3 percent in October. Returns for the first ten months of the year is a very solid 19.6 percent including dividends,” Mohr said.
“The strong local equity returns came entirely from large caps, in other words from the big global companies on the JSE, including Naspers, but also Richemont, British American Tobacco and Anglo American. The Top 40 Index has returned 22 percent in 2017 but the Small-Cap Index only 1.8 percent while the Mid-Cap Index was flat.” The bullion added 1.93 percent while resources stocks continued their winning streak rising to 1.92 percent on the day. The surge in the highly volatile resources sector was led by Kumba Iron Ore which surged 2.77 percent, while Exxaro was up 2.07 percent and Glencore inched up 0.16 percent. The heavy lifting in gold mining stocks was led by AngloGold Ashanti which was up 3.22 percent on the day, followed by Anglo American which rose 2.68 percent, Harmony Gold which 1.51 percent gloss to its share price and Sibanye Gold which inched up 1.38 percent.
The local stock market also benefited from a weakening rand which weakened nearly 2 percent against the greenback and was bid at xxxx at 5 pm with the local currency continuing its losing streak in the wake of the disappointing Medium-Term Budget Policy Statement (MTBPS). The greenback continued to garner support on the day as optimism around the proposed tax reform gains momentum, and President Trump choice of Jerome Powell to succeed Janet Yellen as Fed Chair continued to receive favour from the markets. The rand’s weakness was further highlighted by Friday’s Turkish inflation number which came in at a nine-year high of 11.9 percent, much higher the expectations. The Turkish Lira weakened significantly and with it, the Rand and other EM currencies.
Tiffany Pollock, a forex and money market trader at Merchant West, described the rand as a serial offender in mismanaging fiscus. Pollock said the consequences were being understood as any expectation of the rand’s resilience starts to fade.
“The key resistance level of R14.35 to the dollar should be retested soon, a break of which may materialise in another leg higher to target 14.47 before the value proposition reasserts itself again.”
“Bond outflows through October topped R10 billion and nearly R3bn have exited so far this month suggesting that the positional readjustment for the country’s more realistic fiscal position and conservative SARB is ongoing,” Pollock said.