Optimism over growth boosts JSE

Renewed optimism about global growth lifted the JSE all share for the third successive session on Tuesday, as miners leapt on the weaker rand and Naspers hit a new high.

The weaker currency was once again the major driver of gains on the JSE, as offshore assets offer a hedge against the weaker rand.

The JSE closed 1.04% higher at 56,358.30 points and has now gained 11.26% in 2017.

At one stage the rand weakened to R13.77 to the dollar on Tuesday, its worst level since April, as the latter looked set for further gains.

“The rand has broken a trend line and we expect it to weaken to R13.96 a dollar over the short term and to R15 over the longer term,” said BP Bernstein Stockbrokers portfolio manager Vasili Girasis. The gains were also related to risk-on sentiment, which supported miners.

“We may see some of the laggards, such as ArcelorMittal, start picking up from here.”

He said the weaker rand also reflected some pricing in of political and fiscal risk ahead of the medium-term budget policy statement on October 25 and the ANC conference in December. “Ratings agencies are bound to view the bail-out of SAA by [the] Treasury negatively, which may hasten a further downgrade,” Girasis said.

Analysts said stronger global markets were likely to support the JSE further, with the fourth quarter usually the strongest of the year.

The Dow closed 0.68% up at 22,557.60 points on Monday, on optimism surrounding the implementation of President Donald Trump’s tax reforms. The Dow has gained 14.4% so far in 2017, its biggest annual gain in four years.

BlackRock, the world’s largest asset manager, said that global equity indices hitting new highs did not mean valuations were overstretched.

It was bullish on emerging market equities and believed their valuations were attractive.

“The global economic expansion is likely to continue,” BlackRock said.

The MSCI world index gained 2.3% in September and 5% in the quarter. In the year to date it has returned 16.5% in dollar and rand terms.

“This is precisely why one should be investing offshore so that access could be gained to sectors such as biotechnology and the world’s top IT shares that one cannot get here,” said Stanlib retail investment director Paul Hansen.

Trump’s tax reforms could boost earnings of US companies by 10%, making present valuations cheaper, Hansen said.