Stocks gain from positive global sentiment
JOHANNESBURG - LOCAL stocks look poised to rally to unprecedented levels as appetite for riskier shares returned to global markets this week in the face of the world’s massive vaccination programme against Covid-19.
Analysts said yesterday that the arrival of the first shipment of Covid19 vaccines in the country was likely to sway positive sentiment on the JSE to new highs.
Already the JSE All Share Index has flirted around 60 000 points for the first time in years, with some predicting that it could breach the 70 000 mark by the end of the year.
Old Mutual Wealth investment strategist Izak Odendaal said that the market global sentiment had helped to put the stocks on a bullish drive.
Odendaal said there was a big improvement in global risk appetite, and the market would respond well when the global economy did well as it was highly geared towards risk appetite.
“It’s possible that the All Share Index could rise to 70 000 points, given the support of commodity prices remaining firm and domestic economic recovery,” Odendaal said.
“The long-term recovery for All Share is 15 percent per year on average. All the signs point to it, so it’s plausible.”
Last night President Cyril Ramaphosa addressed the nation after taking delivery of the first consignment of 1.2 million vaccine doses.
The rand reached R14.97 to the dollar yesterday in an attempt to sustainably breach the key resistance level of R15/$, but eased to R15.04 by 5pm while the JSE All Share Index rose 0.52 percent higher to close at 62 796 points and the Top40 Index 0.62 percent to 57 670 points, boosted by mining and resources stocks.
Last month the Bank of America said it estimated that the All Share Index was set to rise by a potential 12 percent to 70 000 points this year.
FXTM’s Lukman Otunuga said the arrival of the vaccines was a welcome development that could boost investor sentiment towards the country’s assets.
Otunuga, however, said South Africa was still facing other domestic risks in the form of high debt and credit rating fears ahead of the February budget.
“While the JSE All Share Index may push higher due to the renewed hope, there may be some obstacles down the road,” he said, “it may take more to push prices beyond the 70 000 points level, especially when factoring in the list of negative themes currently impacting South Africa’s economy.”
Efforts to curb the spread of the virus have gained momentum as infections have fallen below 5 000 a day.
However, manufacturing lost momentum in January as the bout of load-shedding mid-month and the extension of lockdown restrictions weighed on production.
The seasonally adjusted Absa Purchasing Managers’ Index edged up slightly to 50.9 index points from 50.3 points in December.
PricewaterhouseCoopers’ chief economist Lullu Krugel said there were so many unknowns for the economy at the moment.
Krugel said their forecast showed that the economy could grow anywhere between 0.5 and 1.5 percent for the year.
“One thing that is important is that the faster we roll out the vaccine, the quicker we will get the economy back on its feet and better for business, investor confidence,” Krugel said.
“However, South Africa is attractive for a range of reasons, especially the returns, even though we have been downgraded.”