Global backdrop buoys bourse
SOUTH African markets held up well this week, thanks to favourable conditions on global markets outweighing the effects of local political turmoil.
The JSE All-Share index managed to hold gains above the psychological level of 54 000 points, helped in part by what appeared to be a technical rebound in gold stocks after a sharp sell-off over the past three weeks.
The underlying gold price was little changed on the week, while the rand exhibited a firmer bias; a strengthening in the rand usually affects gold producers negatively when they convert dollar profits into rands.
Other commodity prices rebounded from last week’s sell-off, with Brent crude creeping back over the $50-abarrel mark amid optimism that major oil producers would extend oil production cuts later this month.
The US equity market, which usually sets the tone for global markets, continued to push higher. The benchmark S&P 500 hit a record high, as did the techheavy Nasdaq.
The JSE All Share settled 0.9% higher at 54 063.30 points on the week as gold miners gained 5.7% and banks rallied just shy of 2%.
“I don’t think that we’re out of the woods just yet. At the moment, we are benefiting from the global risk-on trade but a lot hangs on what happens to our local currency rating,” said Absa Stockbrokers & Portfolio Management chief investment strategist Craig Pheiffer.
Credit ratings agency Moody’s is expected to visit South Africa this week before making a decision on the country’s debt rating.
In April, S&P Global Ratings and Fitch downgraded the country’s debt rating, sending the rand and local bonds into a tailspin before they regained their composure.
The rand held its own against the dollar late on Friday at R13.17 after Eskom announced the reinstatement of Brian Molefe as its chief executive. Molefe left the state-owned power utility late last year under a cloud after he was implicated in the former public protector’s State of Capture report.
Local bonds were also little changed on the week, with the yield on the R86 bond hovering at 8.74% late on Friday.
The yield spiked to highs of 9.2% in the days following the recent controversial cabinet reshuffle.