JSE gets shot in the arm from global markets

SA’s battered markets got a boost on Tuesday, with the JSE posting its biggest gain since 1997, as global markets staged a relief rally in the hope that US politicians will finally agree on a stimulus package.

While SA was bracing itself for a three-week lockdown — which will practically put on hold an economy that was already on its knees before the coronavirus outbreak — upbeat sentiment was driven by distant events.

Bloomberg reported that US senators were negotiating final points for a stimulus bill of roughly $2-trillion (about R35trillion). That revived investor appetite for riskier assets, boosting local share prices and the rand, which gained for the first time in a week.

Government bonds, which have showed the most obvious signs of stress as 10-year yields surged into double digits, hardly moved though the relentless selling at least slowed.

“A lot of the recovery on the market has to do with the ideas of stimulus,” said Sanlam Private Wealth portfolio manager Nick Kunze. “The JSE was very oversold coming into this week. Some of the shares are down 50% to 60% year to date, so there was definitely an element of people thinking that the selloff is overdone.”

At 6.05pm, the rand was up 1.1% at R17.6348/$, its biggest gain since March 13. On Monday it was R17.90/$, just 2c short of the intraday record low it hit in 2016, but the currency is still down more than a fifth since end-2019. Yields on generic 10year bonds, a key measure of investor perception of the government’s ability to repay its debt, were at 12.38%, from 9.1% at the end of February.

Yields, which move in the opposite direction to price, are likely to remain under pressure ahead of Moody’s Investors Service review of SA’s credit rating.