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Local stocks and rand treading easy after US rating downgrade

On the corporate front, the JSE was buoyed by mining stocks Picture: Karen Sandison, Independent Newspapers.

On the corporate front, the JSE was buoyed by mining stocks Picture: Karen Sandison, Independent Newspapers.

Published Nov 14, 2023


South African markets yesterday shrugged off the impact of the US credit ratings downgrade, with stocks edging higher while the rand remained stable.

Moody's Investor Services on Friday cut the US credit outlook to negative from stable, prompted by a rise in downside risks to the the world’s largest economy’s fiscal strength as the US has a debt burden of $33.6 trillion.

The JSE All Share Index rose 0.7% higher to 71 890 yesterday, tracking global peers ahead of key inflation data releases due this week, including US inflation and unemployment rate and retail sales for South Africa.

On the corporate front, the JSE was buoyed by mining stocks with Harmony Gold leading the pack at 8% higher to R91.27 per share followed by resource-linked firms Northam Platinum, Kumba Iron Ore, African Rainbow Minerals, Impala Platinum, and Anglo American Platinum, which all rose between 3% and 5%.

Sasol rose 2% after Sipho Nkosi stepped down as the chair and non-executive director, citing conflict of interests.

Conversely, Vodacom was the biggest laggard, shedding 7%, despite sales increasing by a third for the first six months of the year, boosted by the acquisition of Vodafone Egypt.

Rand Swiss portfolio manager Gary Booysen said South African markets had begun the week on a pretty good footing with all the major sub indices higher, led by the financial index, industrials and the resources shooting at around 1.7%.

“Currently, that's dragging the All Share Index up roughly seven tenths of 1%. And this is following on optimism that we saw on the S&P 500 overnight as it finished up 1.56% even though we've got Futures down slightly,” Booysens said.

“That might have something to do with Moody's downgrading their outlook on the US debt profile from stable to negative. but over in Europe, things are looking positive. The currency is stable today, so stable for a change we just hovering at around R18.72 to the US dollar.

“So all in all, nice Monday but this is an incredibly busy week coming up and we're still in earnings.”

Meanwhile, The rand also remained muted at R18.75 to the greenback from the previous close of R18.74 on the back of strengthening markets with another expected fuel price cut next month.

The global price of Brent crude oil declined to $81 a barrel last week despite Saudi Arabia and Russia announcing that they will expend current production cuts of 1.3 million barrels a day.

A lower oil price is always helpful, taking further pressure off the global inflation and interest rate outlook.

According to the latest data from the Central Energy Fund (CEF), petrol prices are showing an over-recovery of between R1.23 and R1.27 per litre, while all diesel grades could dip by R1.90 per litre.

The price of 95 unleaded petrol currently stands at R23.18 on the coast and R23.90 inland.

Old Mutual Wealth investment strategist Izaak Odendaal said investors had taken the collective view that the Israel-Hamas conflict will not escalate into something much bigger as the war has entered its second tragic month.

Odendaal said the risk remained that it would escalate, but there was a similar pattern after Russia’s invasion of Ukraine, though the energy markets took longer to stabilise.

“However, softer economic activity is not normally associated with stock market rallies, since it implies weaker earnings growth.

“This cycle might be a bit different, since earnings declined sharply last year, ahead of the broader global economy, as listed company earnings are far more skewed to the goods sector than the overall economy is, and global manufacturing has been in recession.

“The question is whether the upturn in earnings that is projected by consensus can materialise against a backdrop of slowing economic growth. There is reason to be cautious,” said Odendaal.