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JSE rebounds on China recovery

Johannesburg - A strong recovery by the Chinese stock market on Thursday was the trigger for a firm technical rebound on the JSE.

All the major indices, with the exception of gold, were solidly higher by midday and technical analysts said this is mostly a rebound from an oversold position. Most of the top shares were also trading higher. The Gold index dropped to below 1 000 points after trading above 1 500 points at the beginning of the year.

With no news from Greece as the European Union waits for the government to come up with credible proposals to defuse the Greek debt crisis, investors became more concerned about the freefall in the Chinese stock markets. The markets lost more than 32% over the past three weeks and market value of more than $3 200bn was wiped out,

However, on Thursday the Chinese markets recovered and the Shanghai index closed more than 6% higher, the biggest gain in years. The recovery was sparked by new measures by the Chinese authorities to support the market, including a ban on shareholders owning more than 5% of a company selling any shares in the next six months.

This gave local investors the confidence to engage in serious bargain-hunting after the sharp drops over the past few days.

By midday the All-share index was again above the important psychological level of 50 000 points, trading 1.88% higher at 51 182 points. The Top 40-index was 2.05% higher at 45 594 points.

Both indices closed marginally higher on Wednesday after a poor start. The All-share index was at one stage at the same level as on January 1 this year, but then bargain hunters started to push the market higher again.

Investors were earlier so concerned about the situation in Greece that the market collapse in China went almost unnoticed. But as efforts to stem the tide failed, investors became more concerned about the effect the market freefall would have on China’s economy.

On Tuesday evening the Dow Jones index on Wall Street dropped more than 1.5% to the lowest level in five months as investors fretted over what would happen to US exports to China if the economic problems in that part of the world continue.

Naspers [JSE:NPN], which owns 34.4% of Chinese internet giant Tencent, was so far the biggest victim on the JSE of the Chinese rout, but the share rebounded strongly on Thursday. By midday it was 5.12% higher at R1 784.82 and at one stage traded as high as R1 806.50. By midday shares to the value of R1.2bn had been traded.

Naspers’ recovery helped the Industrial index move 2.14% higher, while the Financial index improved by 2.08%. On Wednesday banking shares led the recovery on the JSE and Imara SP Reid said in their daily Market Snapshot on Thursday that the index rebounded sharply above the 200-day moving average.

Further upside is expected as the shares are much oversold.

Among the banking shares FirstRand [JSE:FSR] was 2.33% higher at R53.16, while Standard Bank [JSE:SBK] gained 2.14% to R159.55. In the insurance sector Sanlam [JSE:SLM] traded 2.14% higher at R67.94.

With the European shares also higher, most of the big double-listed shares on the JSE improved their performance. SABMiller [JSE:SAB] was 1.36% higher at R649.43 and Richemont [JSE:CFR] gained 1.39% to R98.43. British American Tobacco [JSE:BTI] was however only 0.08% higher at R680.25.

Sasol [JSE:SOL], which lost almost 10% of its value over the past seven days in response to a lower oil price, rebounded strongly on Thursday morning although at below $60 per barrel the oil price is still in the doldrums. Sasol traded 1.94% higher at R420.01.

The resources sector was by midday 0.06% higher with BHP Billiton [JSE:BIL] 1.29% stronger at R231.80. Anglo American [JSE:AGL] gained 1.80% from its 52-week low to trade at R166.61.

Anglo’s two biggest listed South African subsidiaries, Kumba Iron ore [JSE:KIO] and Anglo American Platinum [JSE:AMS], also traded higher. Kumba traded 4.92% stronger at R120.66 and Amplats gained 2.97% to R256.14.

               
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Rand - Dollar
18.94
-0.2%
Rand - Pound
23.91
-0.1%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.2%
Platinum
910.50
+1.5%
Palladium
1,011.50
+1.0%
Gold
2,221.35
+1.2%
Silver
24.87
+0.9%
Brent-ruolie
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
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