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Johannesburg - Positive comment on China’s economic prospects by President Xi Jinping gave resources shares on the JSE a boost on Wednesday morning, which also pulled the major indices higher.
Xinhua news agency quoted Xi as saying China can maintain annual economic growth of around 7% over the next five years but there are uncertainties, including weak global trade and high domestic debt.
Xi made these comments when the government unveiled its 13th five-year plan, a blueprint for economic and social development between 2016 and 2020.
The Chinese markets responded positively to the plan and other emerging markets, including the JSE, followed. Strong economic growth is vital for commodity producers such as South Africa, as China is by far their biggest market. Commodity prices responded positively to Xi’s comments, with the price of Brent crude oil again rising above $50 per barrel.
By midday on Wednesday the Resources index was already 3.08% higher than the previous day’s close, which lifted the All-share index 0.81% higher to 54 516 points. The Top 40 index was at that stage 0.93% stronger at 48 947 points. The Financial index gained 0.75% and the Industrial index 0.60%.
Imara SP Reid said in its daily Market Snapshot that the Top 40 index remains incredibly overbought and susceptible to profit-taking.
Among the top resources shares Glencore [JSE:GLN] and Anglo American [JSE:AGL] made strong gains. Glencore, which is on a recovery trail and has gained 11.09% over the past 30 days, was one of the biggest movers and traded 6.47% higher at R26.67. Anglo American gained 5.57% to R125.53 after the share lost 4.6% over the previous seven days and 13.3% over the past 30 days.
Lonmin [JSE:LON] however did not share in the resources run and lost 6.78% to R5.09 after the company said shareholders risk losses if they block a $770m refinancing plan that includes a stock sale.
Lonmin wants to raise $400m in a share sale and $370m in loan facilities from banks as it seeks to refinance debt amid a 21% platinum price slump in the past year. The company’s shares have fallen 86% in London trading in 2015.
Shareholders will vote on whether to proceed with the rights issue and debt facilities at a meeting on November 19.
Lonmin said in a letter posted on its website on Tuesday that if shareholders reject the plans, “the group may have to cease trading and shareholders could lose the entire value of their investment”.
READ: Lonmin may shut down if share sale fails
Sasol [JSE:SOL] gained 1.09% from the higher oil price to trade at R465.00. Before Tuesday’s trading the share price gained 5.38% over the past seven days and 14.64% over the past 30 days.
MTN [JSE:MTN] continued its recovery on Wednesday and by midday traded 3.59% higher at R161.13. The company denied rumours that a deal has been struck with the Nigerian authorities on the R71bn fine it was slapped with for not cutting off more than 5 million unregistered subscribers. The company said in a statement on Tuesday evening that negotiations are continuing.
READ: MTN slams ‘false’ reports on $5.2bn Nigeria fine
Naspers [JSE:NPN] benefited from the stronger Chinese markets including Hong Kong, and traded 0.86% stronger at R2 060.62. SABMiller [JSE:SAB] lost 0.19% to R851.92 after the deadline for Anheuser-Busch InBev to make a final offer for all of its shares was extended by another week to November 11.
FirstRand [JSE:FSR] and Standard Bank [JSE:SBK], which both did not move much over the past 30 days, were among the busiest shares on Wednesday. Standard Bank traded 1.11% higher at R142.55 and FirstRand was 1.24% higher at R52.20.
