Local markets make steady recovery

SOUTH African financial markets continued to move positively last week, as more and more evidence suggest that the economy is recovering.

Manufacturing output increased by 1.9 percent year-onyear in November last year. This improved figure, together with the news by Grain SA that it expected a surplus maize production this year, as well as the stronger rand and a surge in commodity prices, improved financial market assets last week.

On the JSE, the all share gained 1 579 points or 3.1 percent last week to close on 52 795 points. The index is now already 2 141 points or 4.2 percent higher since the beginning of the year.

Last week the JSE Top40 index improved by 1 611 points or 3.6 percent, financials index was up by 0.7 percent, while industrials gained 2.9 percent. Given better prospects for commodity prices, the resources index improved by a massive 6.6 percent.

During the US President-elect Donald Trump’s first news conference last Wednesday, no clear indication of his economic policies emerged and it raised more concerns than before.

In reaction to Trump’s media briefing, the rand gained 2 percent on Thursday, reaching its strongest level in two months as the dollar lost ground given the uncertainty towards economic policies by the Trump administration.

The rand traded at the close of the JSE on Friday at R13.57 to the greenback. This was 10 cents or 0.7 percent stronger than the previous Friday.

Against the pound, the rand appreciated by 40c or 2.4 percent to R16.38 and gained 6c (0.4 percent) against the euro to R14.39.

Given the stronger rand, bond rates and listed property also moved higher.

The R186 government bond traded at 8.67 percent at the close on Friday as the returns on the bond improved by 1.5 percent over the week.

The listed property index closed on 648 points. This was an increase of 8 points or 1.3 percent for the week.

Despite the stronger rand, the increase in the international oil price since the last week of December contributed to an under recovery (therefore fuel prices should increase) towards the petrol and diesel prices. Up to Thursday the under recovery for Petrol 95 was 43c a litre and 38c for diesel.

FTSE/JSE Africa Index Series