JSE all share hits six-month high

• All share records ninth day of gains but ‘we are not out of the woods yet’

The JSE all share reached 60,000 points on Tuesday, its highest close since Cyril Ramaphosa became president on February 15. The local bourse has been supported by a dovish stance from the US Federal Reserve and greater risk-on sentiment brought about by the lessening of global trade tension, with the US and Mexico having reached a trade agreement on Monday.

The JSE all share index reached 60,000 points on Tuesday, its highest close since Cyril Ramaphosa became president on February 15.

The local bourse has been supported by a dovish stance from the US Federal Reserve and greater risk-on sentiment brought about by the lessening of global trade tension, with the US and Mexico having reached a trade agreement on Monday.

It was the ninth consecutive day of gains for the all share, which rose 3.8% last week, its best one-week performance since February.

The gains were boosted by an 11.26% rise in Naspers.

Unum Capital analyst Roberto Pietropaolo said the market seemed quite bullish. “There appears to be underlying strength, with the all share cruising higher despite a comeback in the rand.”

Technical analysis showed the top 40 is poised for a break above 54,000 points as the all share aims for its previous high of 61,776.70 points, reached on January 26, he said.

Rand hedges may be due for a recovery, with British American Tobacco down 14.7% in 2018 and AB InBev having broken into positive territory only over the past couple of weeks.

“However, markets are fickle and we are not totally out of the woods yet,” Pietropaolo said.

The rand still seemed oversold, he said. If it weakened again it could have a negative effect on banks and financials.

The all share is up 0.9% in 2018. This is despite losses of nearly 5% in March and 3.57% in May. The breakout by the all share from its range-bound trade is welcome news for investors, who have been losing money for most of 2018, with the weaker rand and the holiday season in the northern hemisphere not helping matters.

It is notable, however, that the all share normally performs better in the second half of the year, with the quarters of December 2016 and September 2015 being exceptions, when domestic matters had a negative effect on the market.

Stanlib retail investment director Paul Hansen said it was too early to say the JSE was back in bull territory. “Movements in the dollar and issues in Turkey can have an effect, not to mention our economy and politics.”

Gains on the JSE are still predominantly driven by global matters, and emerging-market contagion will affect the rand and the JSE negatively, as was the case recently with Turkey.

Renaissance Capital analyst Charlie Robertson noted that the rand is the most-traded emerging-market currency as a percentage of GDP. Altogether $51bn worth of rand, or 19% of GDP, is the daily average.

FxPro analysts warn that President Donald Trump’s rhetoric and China’s seeming reluctance to make concessions in their trade negotiations, could still weaken emerging markets.

TreasuryOne dealer Andre Botha says “all things point to markets turning risk-on again, at least for now”.