JSE ends higher after torrid week

The JSE ended marginally higher on Friday as a handful of big rand-hedge stocks such as Richemont propped up the all share index, masking the continuing sell-off in domestic-orientated shares.

The all-share index ended 0.54% higher at 76,589.54 points, as luxury goods maker Richemont recovered 2%, while BHP and Anglo American gained 2.8% and 1.9% respectively.

The SA Incorporated stocks were mostly weaker, but off the day’s lows, reflecting a slight recovery in the rand after hitting record lows on Thursday.

The rand was 1% firmer at R19.60/$ in late trade, having dropped to R19.83/$ on Thursday after the SA Reserve Bank hiked interest rates by another 50 basis points to bring the repo rate to its highest level in 14 years at 8.25%.

The policy adjustment comes at a time when businesses are battling load-shedding related costs while consumer spending is tepid amid the cost-of-living crisis.

However, governor Lesetja Kganyago stressed that the outcome was a “necessary evil” to guide inflation expectations back to the 4.5% midpoint of the target band.

Anchor Capital fixed-income investment analyst Casey Delport said in a note the Bank walked a “tightrope between raising interest rates too much and allowing inflation to rise”.

It has tightened the policy rate 10 times over the past 18 months, though the vast proportion of the increases served to unwind the stimulus it provided during the height of the pandemic.

“The sell-off in local shares has been driven by the overall poor prospects for the local economy, driven primarily by load-shedding and higher interest rates, which the local economy can least afford,” said Greg Katzenellenbogen, senior portfolio manager at Sanlam Private Wealth.

The sell-off in banks and retailers, as well as domestic industrial stocks such as KAP has intensified in recent weeks as rolling blackouts dimmed the growth outlook.

Banks are down 7.4% so far in May, with losses in Capitec, Absa and Standard Bank running into double digits.

The Reserve Bank estimates loadshedding will shave 2% off GDP in 2023. Telecom stocks have also been in the firing line this month, reflecting market concerns about the fallout of the energy crisis on the economy.