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Johannesburg - Stock markets worldwide, including the JSE, started the new week considerably higher as disappointing job numbers in the US increased expectations that the Federal Reserve could hold off longer on raising US interest rates.
READ: Wall Street ends higher as rate hike fears ease
Lower US interest rates are not only good for the US economy, but also encourage US investors to seek for higher yields in emerging markets such as South Africa.
The prospects of lower US interest rates also put pressure on the dollar, which is good for the prices of resources and resources stocks.
By midday the All-share index on the JSE was 0.70% higher at 52 593 points while the Top 40-index was also 0.70% higher at 46 373 points.
The major indices were pulled higher by the Financial index which rose 1.19%, while the Resources index was 0.87% higher. The Industrial index gained 0.56%.
The Resources index was however losing steam by midday, after trading well above 1% at 40 490 points shortly after Tuesday's opening but settling at 39 820 points by midday.
The result was that the All-share index also lost steam during the morning’s trade. It was as high as 52 593 shortly after the opening, but the intraday graph for the rest of the morning was mainly downwards.
The latest job report in the US came in well below expectations, with data showing US employers last month added the fewest jobs in over a year. Underscoring the economic weakness, an ISM report on Monday showed the pace of growth in the US services sector fell to its lowest level in three months in March.
That put the fear of an imminent interest rise in the US to rest for a while and ensured that foreigners will continue to play an important role on the JSE.
Research by Bank of America Merrill Lynch suggests that 46% of the All-share's free float is already owned by foreigners, slightly lower than the record 48% achieved in July last year. If dual-listed companies are excluded, the figure is 42%.
About 63% of the resource sector is foreign-owned, followed by industrials (48%) and financials (26%).
Of the major resources shares sought by foreigners, Anglo American [JSE:AGL] reversed the losses of the last few weeks and gained 0.65% to R178.15, trading as high as R182 in early morning trade.
According to research by Alwyn van der Merwe of Sanlam Asset Management, Anglo American is currently heavily undervalued if the share is valued on the base of price versus book value. Anglo’s share price, which dropped 20.9% over the last month, currently offers only 77c per rand of book value.
By contrast, shares like BHP Billiton [JSE:BIL] and Kumba [JSE:KIO] are still overvalued using book value as a valuations method. Kumba is trading at the highest premium, asking R2.55 for every rand of the company’s book value, despite the fact that the share price dropped from R401 in April last year to only R139.01 on Tuesday morning. The stock dropped another 0.64% on Tuesday morning to a new 52-week low.
BHP Billiton gained 0.71% to R255.62 and the other double-listed resources conglomerate on the JSE, Glencore [JSE:GLN], rose 1.59% to R50.60. Compared to Anglo American’s big losses over the last month, Glencore is only 4.03% lower for that period.
Various shares in the Financial index reached new 52-week highs on Tuesday morning, including FirstRand [JSE:FSR] which gained 1.37% to R57.09. Its holding company Rand Merchant Holdings [JSE:RMI] was 0.77% higher at R71.54.
Among the insurers Discovery [JSE:DSY] gained 1.36% to a new high of R133.29. Sanlam [JSE:SLM] traded at a new high of R80.99 but lost ground later on and at midday was 0.55% higher at R80.35, just below the previous high.
Naspers [JSE:NPN] gained only 0.27% on Tuesday morning but it was enough to reach a new high of R1 884.99, while Steinhoff [JSE:SHF] climbed 0.75% to yet another high of R76.41.
