Mboweni Budget gives market sentiment a lift

JSE benchmark index breaches the 67 000 points mark

STOCKS rose the highest this year yesterday as the JSE benchmark index breached the 67 000 points mark again buoyed by mining and resources stocks following a better-than-expected national budget.

The JSE All Share Index advanced 1.94 percent to around 67 483 points after Finance Minister Tito Mboweni’s Budget speech generated positive sentiment and lifted the markets.

The mining index rose 5.47 percent to 66 960 points and resources gained 5.54 percent to 70 371 points, while banks lifted slightly and general retailers stocks were in the red.

Schroders’ senior emerging markets economist David Rees said the structural reforms in the Budget could improve public finances and inspire returns to domestic assets.

“A more sustainable way to improve the public finances would be for the government to press ahead with macroeconomic reforms to raise economic growth by tackling South Africa’s long-standing problems of low national savings and investment rates,” Rees said.

The rand, however, was a dampener on a positive trading day, retreating 0.13 percent to R14.74 to the dollar on the day.

Mboweni allocated more than R10 billion funds for Covid-19 vaccines for the next two years, a move that could help boost economic growth by dealing with the pandemic.

South Africa's next batch of Johnson & Johnson Covid-19 vaccines is expected to arrive in the country this weekend.

New data by the US Food and Drug Administration showed that the Johnson & Johnson vaccine was highly effective in severe cases of Covid-19 against the variants identified in South Africa and Brazil.

FNB Wealth and Investments Nicholas Riemer said the next few months were going to be crucial for the markets with nationwide vaccine rollouts.

“The combination of no tax increases as well as governments plans to tackle debt levels will be positive for the rand as well as equity and bond markets,” Riemer said.

“Although a positive budget the effect will be short lived if not implemented correctly.”

Mboweni also pleased big business with a 1 percentage point cut in corporate tax from April 2022 and announced an inflation-beating tax relief for individuals.

Anchor Capital’s investment analyst Casey Delport said these measures were a brave move on the part of the government but general reforms remained frustratingly slow.

“Overall, the National Treasury has done as much as it can at this stage to beat back any further ratings downgrades within the short- to medium-term, although ultimately this will depend on the execution of this fiscal strategy and the implementation of growth reform,” she said.

The debt outlook remained a concern with the country’s borrowing requirement above R500 billion each year in the medium term.

Fitch Ratings said severe challenges to the government’s ability to implement consolidation would persist.