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Port Elizabeth - Good times are here again.
The JSE closed the week a few points short of a new record high as investors seem to buy any share in sight, except for shares in gold mines.
The JSE Top-40 increased sharply on Friday after an uncertain start last week, as the markets waited for the SA Reserve Bank's interest rate announcement.
Shares rallied Thursday and Friday after the news that interest rates will remain unchanged.
Higher interest rates are bad for shares, as higher interest rates increase financing costs. At the same time, consumers have less money to spend.
A higher discount rate also means a lower present value of future cash flows and thus lower returns for investors.
Investors celebrated the sentencing of the interest rate monster with higher prices over the board.
Gold
The only black spot was the gold price.
The gold price dipped after a brief rally earlier last week and seems to be destined to languish below $1 300 per ounce for the time being.
Anglogold Ashanti [JSE:ANG] dropped 5.4% in reaction to the lower gold price and Durban Deep [JSE:DRD] declined nearly 5.6%. Gold Fields [JSE:GFI] fell 8.5%.
Harmony [JSE:HAR] had the dubious honour of achieving the biggest decline in the mining sector - 9.3% - after it announced that gold production in the current quarter to end March might be as much as 15% lower than in the previous quarter.
An accident at the mine a few weeks ago disrupted production.
International impact
The rest of the market was boyed by good news all around. In addition to the relief of unchanged interest rates, international economic news fueled the positive sentiment.
The Chinese government indicated that it will start to stimulate its economy and latest figures from the US and Europe were also positive.
Markets around the globe ended the week on a positive note. Indices from Tokyo to London to New York advanced.
The JSE ignored the bad news about even higher producer price inflation, which increased to 7.7% in Februarie compared to 7% in January.
A few months ago the producer price index was rising at around 5%.
These recent higher increases point to higher consumer inflation down the line and higher interest rates thereafter.
The week ahead
The market will probably reach a new record high this week as shares still seem strong.
Maybe investors are planning a huge party when the JSE Top-40 reaches 50 000 points.
All mining shares increased solidly last week. Kumba Iron Ore [JSE:KIO] increased by 7.5% and Assore [JSE:ASR] was nearly 11% higher.
Amongst industrials Reunert [JSE:RLO] attracted attention with a 10.5% increase, while heavyweights Imperial [JSE:IPL] and Tiger Brands [JSE:TBS] seemsed to remain strong.
Adcock Ingram [JSE:AIP] seemed to have turned the corner and advanced to R59.10 per share after its recent low of R53.25.
PicknPay [JSE:PIK] also seemed to have won investors back and strong demand saw the share price increase by more than 10% last week.
Accountants at PicknPay probably started to put together the results for the year to February, and it seems that investors are hoping for long-awaited improvement.
Bank shares are set to continue their upward trend, while interest rates - and bad debt - remain low.
Capitec led the advance this week with an increase of some 5% to R195 after satisfactory results.
The young bank is set to continue growing after making adequate provisions for bad debt and having new plans to grow its product range.
Companies in the Altech Group is bound to publish annual results for the financial year to February soon, as well as Holdsport [JSE:HSP] and Raubex [JSE:RBX].
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at NMMU.
The JSE closed the week a few points short of a new record high as investors seem to buy any share in sight, except for shares in gold mines.
The JSE Top-40 increased sharply on Friday after an uncertain start last week, as the markets waited for the SA Reserve Bank's interest rate announcement.
Shares rallied Thursday and Friday after the news that interest rates will remain unchanged.
Higher interest rates are bad for shares, as higher interest rates increase financing costs. At the same time, consumers have less money to spend.
A higher discount rate also means a lower present value of future cash flows and thus lower returns for investors.
Investors celebrated the sentencing of the interest rate monster with higher prices over the board.
Gold
The only black spot was the gold price.
The gold price dipped after a brief rally earlier last week and seems to be destined to languish below $1 300 per ounce for the time being.
Anglogold Ashanti [JSE:ANG] dropped 5.4% in reaction to the lower gold price and Durban Deep [JSE:DRD] declined nearly 5.6%. Gold Fields [JSE:GFI] fell 8.5%.
Harmony [JSE:HAR] had the dubious honour of achieving the biggest decline in the mining sector - 9.3% - after it announced that gold production in the current quarter to end March might be as much as 15% lower than in the previous quarter.
An accident at the mine a few weeks ago disrupted production.
International impact
The rest of the market was boyed by good news all around. In addition to the relief of unchanged interest rates, international economic news fueled the positive sentiment.
The Chinese government indicated that it will start to stimulate its economy and latest figures from the US and Europe were also positive.
Markets around the globe ended the week on a positive note. Indices from Tokyo to London to New York advanced.
The JSE ignored the bad news about even higher producer price inflation, which increased to 7.7% in Februarie compared to 7% in January.
A few months ago the producer price index was rising at around 5%.
These recent higher increases point to higher consumer inflation down the line and higher interest rates thereafter.
The week ahead
The market will probably reach a new record high this week as shares still seem strong.
Maybe investors are planning a huge party when the JSE Top-40 reaches 50 000 points.
All mining shares increased solidly last week. Kumba Iron Ore [JSE:KIO] increased by 7.5% and Assore [JSE:ASR] was nearly 11% higher.
Amongst industrials Reunert [JSE:RLO] attracted attention with a 10.5% increase, while heavyweights Imperial [JSE:IPL] and Tiger Brands [JSE:TBS] seemsed to remain strong.
Adcock Ingram [JSE:AIP] seemed to have turned the corner and advanced to R59.10 per share after its recent low of R53.25.
PicknPay [JSE:PIK] also seemed to have won investors back and strong demand saw the share price increase by more than 10% last week.
Accountants at PicknPay probably started to put together the results for the year to February, and it seems that investors are hoping for long-awaited improvement.
Bank shares are set to continue their upward trend, while interest rates - and bad debt - remain low.
Capitec led the advance this week with an increase of some 5% to R195 after satisfactory results.
The young bank is set to continue growing after making adequate provisions for bad debt and having new plans to grow its product range.
Companies in the Altech Group is bound to publish annual results for the financial year to February soon, as well as Holdsport [JSE:HSP] and Raubex [JSE:RBX].
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at NMMU.
