JOHANNESBURG – South Africa’s stock market and local currency rallied yesterday on the back of a ceasefire in the trade spat between the US and China that boosted investor sentiment.
The FTSE/JSE All Share Index during the day soared 3.11 percent to 52 241 points led by heavyweights Naspers and Sasol, and closed up 2.79 percent at 52 079.22 points.
The rand strengthened more than 1 percent and was bid at R13.705 by 5pm.
The White House over the weekend announced it would pause its plans to raise tariffs on $200 billion (R2.76 trillion) worth of goods from China for at least three months, to give China time to remove some of the trade barriers that the Trump administration has taken exception to. The tariffs were scheduled to rise to 25 percent from January 1, but will now remain at 10 percent.
In response, China pledged to buy farm, energy and industrial goods to reduce its trade surplus with the US.
Analysts from Vestact said the G20 meeting in Argentina between the two world’s biggest economies had proved to be a buffer for the equities markets.
“In particular, tariffs imposed on cars imported into China will be brought down or scrapped completely. This is a great start to December, and hopefully continues for the rest of the month,” Vestact said. “Another, less publicised, meeting that took place in Argentina was between Russia and Saudi Arabia. The two nations have agreed to continue their cap on oil production by cutting their output levels.”
Speculation is rife that Opec and Russia would agree on some form of production cut at a meeting later this week. Neil Wilson, a chief market analyst for Markets.com, said oil prices jumped on news of the Sino-US trade progress as tariffs were a key factor supporting fears around global growth and oil demand growth next year.
“We can expect oil to be supported by a more positive demand growth story in light of the US-China thaw, but supply remains a problem, especially as we look ahead to 2019 as more US crude enters the market,” Wilson said.
Bianca Botes, a treasury manager at Peregrine Treasury Solutions, said with the trade war being put on the back burner for now, investors are open to seeking higher risk assets often found in the emerging market space.
“Because the rand is so heavily traded, the impact of this risk-seeking behaviour is rapidly reflected in the local currency,” Botes said.
Rene Hochreiter, a mining analyst at Noah Capital Markets, said mining shares had surged on the prospects of increased demand following the casefire.
“The 90-day moratorium on duties between the two countries means there is going to be a lot more demand for commodities, agricultural products and services. It’s almost like a quantitative easing to the world,” he said.
The trade war truce fed through to commodity prices and thus mining shares, which saw Anglo American Platinum rising 6.62 percent to R474.46 a share, Northam Platinum jumped 3.97 percent to R41.95 a share, while Assore increased by 3.48 percent to R285.32 a share.
Naspers, the biggest share on the JSE, rose 5.76 percent to R2 992.14 a share, while petrochemicals giant Sasol rose by 6.85 percent to R434.11 a share.