All share almost tops record high
The JSE all share came within a whisker of surpassing its two-and-ahalf-year record high on Thursday as miners and rand hedges jumped in risk-on trade, before the stronger rand put a damper on further gains. The all share reached a best intraday trade level of 55,222.80 in the morning, only 132 points lower than the high of 55,355.10 on April 24 2015. It closed 0.1% higher at 54,888.90. The rand firmed to R12.8585/$, its best level in a month, before weakening.
The JSE all share came within a whisker on Thursday of surpassing the record high it set two-and-a-half years ago as miners and rand hedges surged in risk-on trade, before a stronger rand forestalled further gains.
The all share reached a best intraday level of 55,222.80 in the morning, only 132 points lower than the high of 55,355.10 on April 24 2015. It closed 0.10% higher at 54,888.90.
The rand rose to R12.8585/$, its best level in a month, before weakening on the dollar’s slight recovery against the euro.
The all share’s upbeat performance was out of kilter with SA’s recessionary conditions and possible further downgrades, with some analysts warning valuations were high.
The historical price:earnings ratio (p:e) on Thursday was a steep 21. Even on a forward basis of 14.5, the all share was more highly valued than the MSCI emerging markets index, trading at a p:e of 12.8.
Old Mutual Investment Group portfolio manager Feroz Basa said at these levels, the market was not a “screaming buy. The MSCI market composite as a whole — SA is about 8% of that index — was still cheaper than the South African market”.
The worst might not be over for the economy. “But a deteriorating economy could be yielding market opportunities.” Stanlib retail investment director Paul Hansen said the stronger rand had been hurting the JSE in 2017. This was again evident on Thursday with property and retail stocks that earn the majority of their earnings offshore particularly hard hit.
“The elastic feels stretched in the short term, which may anticipate a period of weakness in the near future,” Hansen said.
There has been widespread belief that the all share would eventually break upwards out of its long sideways consolidation, Hansen said, based on positive emerging market sentiment and the US Federal Reserve’s continued dovish stance on rates.
THE ELASTIC FEELS STRETCHED IN THE SHORT TERM, WHICH MAY ANTICIPATE A PERIOD OF WEAKNESS
The Fed’s statement on Thursday was the initial catalyst for the improved performance as rates were kept unchanged.
Anglo American and Kumba Iron Ore supported the upward momentum after announcing they were resuming dividend payments. Anglo’s interim results were met favourably as it posted interim profit of $1.4bn compared with an $800m loss.