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Johannesburg - The decision by Turkey to sharply increase interest rates to protect its currency has not only led to a rally in the Turkish lira, but to an important improvement in sentiment towards emerging economies.
This benefited not only the rand, which strengthened temporarily to below R11.00 to the dollar early on Wednesday, but also the mood on the JSE where all major indices were higher by lunchtime.
Shortly after midday, the All-share index was 519,92 points or 1.14% higher on 46 245 and the Top 40 index traded 602 points or 1.26% higher on 41 602. All the other major indices were also higher.
The improvement in sentiment towards emerging markets started on the Asian markets on Wednesday morning and continued on the local market. Indications are that the magnitude of selling is reducing.
Analysts said the local market is ready for a technical recovery after the heavy sell-off of the last few days, and the improvement in sentiment was therefore ideal for a rise in share prices.
However, they warn that the market is still vulnerable for a further correction, particularly if the US Federal Reserve’s announcement on the easing of its stimulus to the American economy on Wednesday evening is worse than what has already been discounted.
The market expects the US central bank to trim its bond repurchase programme by a further $10bn a week.
Imara SP Reid warned in an early morning note that the overall picture was one of only modest improvement, as the technical structure remained vulnerable to additional selling pressure.
“The accumulation of equities should be approached with a degree of caution at this point.”
The stronger rand contributed to the better sentiment. The currency traded overnight at R10.89 to the dollar, 36c off Monday’s weakest level of R11.25. However, at midday the rand again traded above R11 to the dollar at R11.135 as liquidity levels were not strong enough to support the currency.
Attention is now turning to the Reserve Bank's interest rates decision later on Wednesday. A rise in rates will support the rand even further, but a Reuters survey among leading economists indicated that they expect the bank to keep rates unchanged.
Turkish central bankers hiked rates from 7.75% to 12%, and the repo rate from 4.5% to 10%.
Gold mining stocks recovered after Tuesday’s sell-off. AngloGold Ashanti (ANG) was the strongest gainer among gold shares‚ adding 2.08% to R155.729. The index was 2% higher by midday.
The resources index was 2.32% higher. Anglo American (AGL) was the star performer, climbing 6.42% to R263.93.
Naspers-N shares (NPN) continued their recovery after strong selling last week‚ gaining 6.146% to R1 137.82.
This benefited not only the rand, which strengthened temporarily to below R11.00 to the dollar early on Wednesday, but also the mood on the JSE where all major indices were higher by lunchtime.
Shortly after midday, the All-share index was 519,92 points or 1.14% higher on 46 245 and the Top 40 index traded 602 points or 1.26% higher on 41 602. All the other major indices were also higher.
The improvement in sentiment towards emerging markets started on the Asian markets on Wednesday morning and continued on the local market. Indications are that the magnitude of selling is reducing.
Analysts said the local market is ready for a technical recovery after the heavy sell-off of the last few days, and the improvement in sentiment was therefore ideal for a rise in share prices.
However, they warn that the market is still vulnerable for a further correction, particularly if the US Federal Reserve’s announcement on the easing of its stimulus to the American economy on Wednesday evening is worse than what has already been discounted.
The market expects the US central bank to trim its bond repurchase programme by a further $10bn a week.
Imara SP Reid warned in an early morning note that the overall picture was one of only modest improvement, as the technical structure remained vulnerable to additional selling pressure.
“The accumulation of equities should be approached with a degree of caution at this point.”
The stronger rand contributed to the better sentiment. The currency traded overnight at R10.89 to the dollar, 36c off Monday’s weakest level of R11.25. However, at midday the rand again traded above R11 to the dollar at R11.135 as liquidity levels were not strong enough to support the currency.
Attention is now turning to the Reserve Bank's interest rates decision later on Wednesday. A rise in rates will support the rand even further, but a Reuters survey among leading economists indicated that they expect the bank to keep rates unchanged.
Turkish central bankers hiked rates from 7.75% to 12%, and the repo rate from 4.5% to 10%.
Gold mining stocks recovered after Tuesday’s sell-off. AngloGold Ashanti (ANG) was the strongest gainer among gold shares‚ adding 2.08% to R155.729. The index was 2% higher by midday.
The resources index was 2.32% higher. Anglo American (AGL) was the star performer, climbing 6.42% to R263.93.
Naspers-N shares (NPN) continued their recovery after strong selling last week‚ gaining 6.146% to R1 137.82.
