JOHANNESBURG – Analysts have weighed in on the recovery on the JSE all share index (Alsi), which has strengthened 7.1 percent in the first three months of 2019.
Independent analyst Johann Biermann said yesterday that the Alsi had posted its best first quarter since 2007, signalling that it had bounced after the JSE’s worst year since the financial crisis.
The rebound was despite issues with state-owned enterprise Eskom, the uncertainty of a ratings downgrade and problems facing the governing ANC.
“Last year was the JSE’s worst year since the financial crisis. At the end of 2018 the US Fed basically gave up on further rate hikes and the rand was quite weak during February and March,” he said.
The Alsi closed at 57 109.64 points yesterday, 1.15 percent higher than the previous close on positive market sentiment.
Investec chief economist Annabel Bishop said: “The Alsi saw marked recovery through the first quarter of this year, closing at 56 463, up more than 5 000 index points from its first day, with 8 percent total returns quarter-on-quarter, led by resources and industrials.”
Merrill Lynch earlier this year said it expected the Alsi to hit the 61 000 mark this year and earnings per share to grow by 12 percent.
Mining companies were the biggest winners on the back of record palladium and rhodium prices since late last year. The strong prices helped lift the gloom from platinum producers with Impala Platinum, Lonmin and Anglo American Platinum posting bumper profits. Sibanye-Stillwater, one of the world's biggest platinum producers, was also helped by the record palladium price.
Amelia Morgenrood, a PSG Wealth financial adviser, said the market had been expecting a better performance by the Alsi.
She said in 2018 the price earnings ratio of the JSE, one of the most popular valuation measures, dropped substantially to below 16 times, adding it was above 20 for most of the period between 2016 and 2018.
“The lower valuation levels, together with renewed interest in emerging markets, led to a general improvement in share prices. Thanks to US interests rates seeming to be on hold for the foreseeable future, flows to emerging markets might persist,” she said.
Morgenrood also said that valuation and liquidity were two essential catalysts for a market movement.
Kokkie Kooyman, an analyst at Denker Capital, said in terms of the trading volumes, the first quarter was at the lowest level in years.
“Valuations are also the cheapest in the five years. If you look at last year, many foreign investors sold out of South Africa and unit trusts had large outflows as investors took money out of the market due to fears about the effect on the market of continued poor economic growth,” Kooyman said.