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JSE record run shrugs off downgrade threat

Johannesburg - Share prices on the JSE are in record territory again, despite the fact that economists and analysts are deeply concerned about the possibility that South Africa might be downgraded again by the international rating agencies.

After reaching a new intraday high of 50 120 on Friday before closing just below 50 000, the All-share index rose sharply on Monday morning to rise above the previous record, before the market calmed down and it started to lose ground again.

But by midday the All-share index remained above the 50 000 level and was still 0.20% higher at 50 032. The Top 40 index, which also reached record levels on Friday before closing lower, was 0.21% higher at 45 024.

The JSE’s robust start was probably due to the New York market’s strong performance on Friday after the US Labour department said the world’s biggest economy created another 217 000 jobs in May, in line with expectations. 

The Dow Jones and Standard and Poor's indices closed on new records, and the Asian markets also opened strongly on Monday morning.

Economists cheered the solid report, which marked the fourth straight month that more than 200 000 jobs had been created. The figures are the latest in a string of data out of the United States indicating its economic recovery is well on track, even as the Federal Reserve winds down its multi-billion dollar stimulus programme.

The local market is probably still supported by a strong inflow of foreign capital, particularly after the European Central Bank announced last week that ridiculously low interest rates in the eurozone will be lowered even more to stave off possible deflation in Europe.

This means that investors in developed markets are seeking higher yields in developing markets such as South Africa, where interest rates are still relatively high.

This is probably also the explanation for the strong improvement in the value of the rand, which on Monday morning traded at R10.56 to the dollar after reaching R10.805 last week on concerns about South Africa's economic prospects, which have not changed since then.

Last week a series of economic indicators told a sad story about the state of the economy, which will be confirmed by this week's mining production figures.

But that is why some analysts are seriously worried about the upcoming reviews of South Africa’s credit rating, because that can have a serious influence on the inflow of foreign capital with disastrous consequences for bonds, stocks and the rand.

The strongest performer on Monday morning was the mining sector, with the Resource 10 index 0.71% higher and the gold index 1.21% stronger after the gold price recovered to above $1 250 per fine ounce.

In the gold sector Harmony Gold [JSE:HAR] increased by 2.52% to R28.88. Sibanye Gold [JSE:SGL], which has for weeks one of the busiest shares on the JSE, strengthened by 1.65% to R27.05. This share has increased by 190.5% in value over the last 12 months, but Harmony is 32% lower.

The platinum sector has captured a great deal of attention, with wage negations to end the ongoing strike on the verge of being settled or reaching a disastrous stalemate.

Investors in platinum shares adopted a wait-and-see attitude. Anglo American Platinum [JSE:AMS] was 0.06% lower at R469.74 while Impala Platinum [JSE:IMP] traded 0.29% lower at R111.44. Lonmin [JSE:LON] was 0.92% higher at R44.77.

Anglo American strengthened by 1% to R262.60 and Kumba Iron Ore [JSE:KIO] improved by 0.82% to R337.76.

Kumba has however still been 30.2% lower for the last 12 months due to concerns over a lower ore price and fears that the Chinese economy might slow down even further, which will put further pressure on the iron market.

 - Fin24
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Rand - Dollar
18.96
-0.1%
Rand - Pound
23.92
-0.1%
Rand - Euro
20.43
+0.0%
Rand - Aus dollar
12.35
-0.0%
Rand - Yen
0.13
-0.1%
Platinum
908.05
+1.2%
Palladium
1,014.94
+1.3%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
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