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Johannesburg - The rand's sharp fall to its weakest level in a week-and-a-half in response to a strong dollar surge in the United Sates on Friday morning gave the JSE a welcome push in morning trade. The major indices were back at all-time highs.
The weaker rand, which dropped as low as R13.69 to the dollar by mid-morning, supported the big dual-listed shares in the Industrial and Resources indices.
By mid-morning the All-share index was 0.56% stronger on a new high of 58 224 points, while the Top 40 index firmed 0.65% to a high of 51 858 points. This was mainly due to the Industrial index, which lifted 0.54% to a new record, and the Resources index, which gained 1.42%. Mining companies sell their commodities in dollar and receive more in rand if the local unit is weaker.
The dollar came back strongly after two days of losses, after the US senate approved a budget blueprint for the 2018 fiscal year late on Thursday which increased optimism about prospects for tax reforms and fiscal stimulus in the country.
Although the rand’s weakness was mainly due to the rampant dollar, analysts do not expect the local unit to recover in the near future as bearish investors on the currency are closing positions ahead of next week’s mini budget speech.
Economists are bearish about what the medium-term budget speech will reveal, with some of them forecasting an exchange rate of R14.00 to the dollar soon.
According to a Reuters poll, economists expect Finance Minister Malusi Gigaba to announce a revenue shortfall of R40bn in his maiden mini budget speech on Wednesday. It is likely to push the budget deficit to 3.9% of gross domestic product, which can increase the possibility of further credit rating downgrades in November.
Reserve Bank governor Lesetja Kganyago is however not so pessimistic about further credit rating downgrades. He said in a interview that a narrowing current account deficit, improving economy and stable inflation should help South Africa avoid such a downgrade.
Naspers [JSE:NPN], by far the biggest share on the JSE as well as the Industrial index, set the tone on the market by gaining 1.28% to a new all-time high of R3 296.70 by mid-morning. There was also some support from Tencent, Naspers’s Chinese internet subsidiary which is listed in Hong Kong which traded 0.98% higher at HK$349.60. Naspers at one stage was above R3 300 per share and traded as high as R3 315.20.
Sasol [JSE:SOL] was one of the most traded shares. It gained 0.44% to R393.10, while Steinhoff [JSE:SHF] was 0.15% stronger at R60.87.
Retail shares continued to be on the forefront after Woolworths [JSE:WHL] and Pick n Pay [JSE:PIK] initially suffered big losses before recovering somewhat. Woolworths was 1.03% softer at mid-morning at R57.41 and Pick n Pay lost 0.52% to R59.21. The Foschini Group [JSE:TFG] was 0.77% lower at R137.07.
Kumba [JSE:KIO] continued to set records and traded 3.25% higher on a new 52-week high of R266.67. The share gained more than 20% over the past 30 days and more than 65% over the past 90 days, as there is a strong demand for its high quality iron ore from Chinese steelmakers who are forced by the Chinese government to clean up the environment.
The big commodity shares were all higher. BHP Billiton [JSE:BIL] was 2.13% stronger on a new 52-week high of R252.54 and Glencore [JSE:GLN] gained 2.06% to a 52-week high of R68.35.
Anglo American [JSE:AGL], which dropped the most in the recent correction, was 2.15% stronger at R260.75, less than 1.5% lower than the recent 52-week high of R264.11.
