Rand pushes all share to key level
The JSE all share index could soon hit the magical 60,000-point level if current trends continue as rand weakness is set to drive rand hedges and miners to even greater heights.
The JSE all share index could soon hit the magical 60,000point level if current trends continue, as the weaker rand is set to drive rand hedges and miners to even greater heights.
The all share ended Friday just below 60,000 at 59,638.20, 0.52% up for the day, but the trend was clear. Rand hedges drove the market higher as the rand lost nearly 2% against the dollar in the day.
Rand hedges AnheuserBusch InBev, British American Tobacco and Richemont all closed more than 2% higher.
“We will probably see some profit taking before then, but the momentum is clearly driving the big stocks,” said Afrifocus Securities portfolio manager Ferdi Heyneke. And it was not only the rand hedges that would be positive for the market.
“Previous laggards have found some support, mostly among the retailers and the pharmaceuticals, such as Aspen,” he said.
The all share has gained 17.74% so far in 2017 as the market is set for the best annual performance since 2013. Naspers remains a key driver, up 72.3% in 2017. The market heavyweight continues to gain from its 33% interest in Chinese internet firm Tencent, with some analysts targeting a level of R4,500. On Friday Naspers ended 1.12% higher at R3,470, trading at a price:earnings of 136 times.
After moving sideways for three years, the all share is finally following international markets. The Dow Jones is up 19% in 2017, boosted by US President Donald Trump’s tax reforms and upbeat third-quarter earnings growth with 70% of companies reporting higher than expected earnings.
Most analysts remain positive about the equity market, despite rising valuations. However, it is emphasised that the dominance of the big rand hedges is unhealthy as it increases concentration risk.
“The heavy weighting of some stocks, noticeably Naspers and Richemont, is somewhat concerning in terms of market health,” said Stanlib retail investment director Paul Hansen. However, some analysts say remaining out of the market is equally risky and it does not make sense to shun the market out of political concerns ahead of the ANC’s elective conference in December.
“Positive political developments could easily see the rand rally,” said Old Mutual MultiManagers analyst Izak Odendaal. In such an event locally focused shares could receive a fillip.
The small-caps index has lost 1.6% so far in 2017 and the midcaps 1.5%.
Banks’ performance has also been flat in 2017 and could be heading for a recovery.
WE WILL PROBABLY SEE SOME PROFIT TAKING BEFORE THEN, BUT THE MOMENTUM IS CLEARLY DRIVING THE BIG STOCKS