Bond yields hit best level in years

The JSE all share was firmer on Wednesday as the market welcomed Finance Minister Malusi Gigaba’s budget speech, which emphasised a reduced debt burden and avoided direct tax rates.

Instead, VAT was raised from 14% to 15%, the first increase in 25 years.

The all share closed 1.17% higher at 58,606 points and the top 40 rose 1.39%. Food and drug retailers gained 3.53%, banks 2.39%, industrials 1.66%, property 1.35% and financials 1.17%.

The gold index dropped 0.48%, resources shed 0.28% and general retailers lost 0.22%.

The rand quickly gained 10c soon after Gigaba began his speech, firming from R11.7301 to the dollar to R11.6268. It was at R11.6502 to the dollar soon after the JSE’s close.

Local bonds also reacted positively, with the budget deficit set to narrow over the next few years. The R186 was bid at 8.03% from 8.09% while Gigaba was speaking, before soon breaking through 8% to 7.97% at the JSE’s close, its best level since April 2015.

Diversified miner Glencore gained 3.02% to R65.25 after reporting a 49% increase in cash generated from operations in the year to end-December.

Capitec Bank jumped 6.69% to R876, while FirstRand gained 3.07% to close at R75.20.

Shoprite added 3.98% to R250 and Clicks 2.11% to R169.

Capital & Counties lost 4.65% to R43.72 after reporting a 1.7% decrease in net asset value per share to £3.34 compared with the previous year’s. Adcock Ingram added 2.75% to end the day at R70.90, after reporting a 33% increase in first-half headline earnings per share in the six months to endDecember.

The budget was generally seen as a reversal from the medium-term budget policy statement unveiled late last year, in which the budget deficit was expected to rise to 4.3% of GDP, from an envisaged 3.4% in February 2017.

The revenue shortfall of R48.2bn for 2017-18 will be covered by additional tax revenue of R36bn, based predominantly on the VAT increase. This will deliver R22.9bn to the fiscus, based on current consumer spending patterns.

The top-40 Alsi futures index rose 1.48% to 51‚728 points. The number of contracts traded was 23,393 from Tuesday’s 24‚276.