SA’s markets cheer easing of the lockdown restrictions
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The Market yesterday embraced the easing of lockdown restrictions to level 1 as stocks on the JSE rose to record highs due to the move earmarked to boost economic activity.
The JSE All Share Index edged up more than 2.5 percent, peaking at an all-time high of 67 859 points during intraday trade before settling to 2.12 percent higher to 67 536 points.
The JSE benchmark index closed in the red on Friday, pulled down by broad-based losses in platinum and gold mining sector stocks.
But yesterday, the market rebounded, buoyed by gold mining stocks which rose 2.16 percent to 65 698 points as investors welcomed the relaxation of lockdown measures.
Banks, stocks and general retailers inched up 2.2 percent and 1.36 percent to 7 005 points and 5 325 points, respectively.
FXTM’s Hussein Sayed said the JSE was benefiting from risk-on investor sentiment as global concerns over bond yields eased. “The slide in global bond yields today is sending equities higher,” Sayed said. “Equity markets are trying to recover from last week’s falls after rising global bond yields took many investors by surprise.”
The rand, however, was little changed from Friday’s volatility as it breached the R15/$-mark before settling 0.04 percent higher to R14.97 as the greenback gained ground on other major currencies.
Investec chief economist Annabel Bishop said the rand returned to R15 to the dollar on market realisation that the Budget still portrayed a poor fiscal outlook for South Africa.
The rand depreciated close to 1.5 percent over the last week against the dollar, after strengthening by a similar figure over the week before.
“The implications of domestic weak economic fundamentals for South Africa’s portfolio assets have reasserted in investor decisions,” Bishop said.
“We expect the domestic currency will weaken in the second quarter of 2021, to average R15.40 to the dollar and similar in the third quarter, although the risks to the downside are high.”
South Africa has moved to lockdown level 1 which should be positive for the economy as well as the rand but the currency is likely to be driven by international events.
President Cyril Ramaphosa on Sunday announced the easing of the lockdown restrictions on movement and activity due to the decline in Covid-19 infections.
Alert level 1 means that religious, social, political and cultural gatherings will be permitted, subject to adherence to health protocols, sale of alcohol will be permitted, and the hours of the curfew will be from 12 midnight to 4am.
Old Mutual Investment Group’s chief economist Johann Els easing restrictions would open up the economy a bit more and boost confidence.
Els said the ongoing rollout of the Johnson & Johnson vaccine study would reduce further economic impact and might help prevent further lockdowns later this year.
“There are many risks with the possible resurgence of Covid-19 infections and I don’t want to gloss over them,” Els said. “But I expect a strong economic recovery this year in the region of 5 percent on the back of very strong global growth.”