SOUTH African stocks rallied to a record high yesterday, mainly buoyed by tech stocks after the Chinese government reopened its borders and hopes of the US Federal Reserve slowing the pace of interest rate hikes.
The JSE All-Share Index rose more than 2% yesterday to surge 78 500 points, the highest on record, as China reopened its borders after three years of Covid-related restrictions and indicated it could end its crackdown on the domestic tech sector.
This was a significant improvement from advancing 1.9% to close at 76 858 on Friday, building up on positive sentiment as it ended 2022 in positive territory at 4.5% year on year, after reaching a peak of 78 297 points in March, 2022.
The Top 40 companies index also followed suit by rising 2.2% and hit an historic high of 72 410 points yesterday. The JSE was boosted by Naspers and Prosus which traded the most shares, while fund manager Coronation gained the most with 7.3% to R34.29 per share.
“It’s a risk on trade once again. The markets are up strongly today driven by resources. We are also seeing a bit of a rally in gold,” said Gary Booysen, Rand Swiss portfolio manager.
“The expectations that interest rates might rise at a slower pace is putting a bit of shine back on to the yellow metal and certainly helping equity markets which are rocketing high.
“We have had a good 2023 so far,” Booysen said.
Resource-linked shares, retailers and industrials were advancing firmly amid optimism around the reopening of the world’s second-largest economy.
South32 rose 4.8% to R51.70 per share, Impala Platinum advanced 3.7% to R233.73 per share, while Truworths and Spar were 4.2% and 4.0% higher to R59.99 and R128.25 per share, respectively.
The easing of restrictions in China has been positively welcomed by the global markets and lifted investors’ sentiment as the world’s second largest economy over the weekend announced that incoming travellers would no longer need to quarantine.
China’s reopening could, however, drive up demand for fuel and raise oil prices after Brent crude oil rose more than 3% to above $81 (R1 370) per barrel yesterday, rebounding further from a nearly one-month low of $77.6 touched last week. At the same time, hopes of a less aggressive monetary policy stance by the US Federal Reserve continued to support market sentiment.
As a result, investors have increased bets that the Fed will deliver slower rate hikes following Friday’s jobs report which showed that the US economy added 223 000 jobs in December, but there was a net 28 000 of downward revisions to the past two months.
A number of weaker than expected data readings in the US last month have added to hopes that the Fed would stick to a slowing rates hike trajectory.
The Fed raised the federal funds rate by 50 basis points in its last meeting for 2022, pushing it to 4.25% to 4.5%, the highest since 2007. The decision marked the seventh straight hike in 2022, though it was one of the slowest in months following 75 basis points increases in the previous four meetings.
Meanwhile, the rand treading water yesterday, strengthening below the R17- mark to the dollar to reach R16.96 as market risk aversion pulled back somewhat from the end of last week.
Investec chief economist Annabel Bishop said the rand’s modest strength was coming after Friday’s weakness to R17.49 when the dollar strengthened on data showing good labour market conditions. Bishop said the US economic data caused some expectations of US rate hikes potentially falling away more quickly to abate.
“A number of US data readings came out weaker than expected last month, adding to hopes that the US would stick to a slowing rates hike trajectory, which would weaken the dollar, although volatility is likely in the data, and so for the rand,” Bishop said.
“Holding back the rand domestically, little improvement is expected this year in terms of state infrastructure in South Africa, particularly on the rail, port, electricity and water-supply front, all of which are severely impeding economic growth and job creation,” the economist said.
BUSINESS REPORT