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Johannesburg - Financial shares were the biggest winners on the JSE on Wednesday morning, supported by the rand which is trading around its best level in seven weeks. The local currency and shares are riding a wave of renewed global risk appetite as investors bet that Britons will vote to stay in the European Union.
Analysts warned however that many investors still prefer to be on the sidelines, as the result of Thursday’s referendum is regarded as too close to call.
By mid-morning the Financial index was already 1.59% higher in response to the rand, which has gained more than 3% in the previous three sessions on a global rise in risk appetite. By mid-morning the rand traded at R14.71 to the dollar, but on Tuesday it went as high as R14.63, the firmest since May 5.
READ: Rand steady as caution prevails ahead of UK referendum
Most of the other major indices on the JSE were also higher, with the All-share index gaining 0.80% to 53 381 points. The Top 40 index, with all the big capitalisation shares, traded 0.86% stronger at 47 314 points. The Industrial index gained 0.75% supported by moderate gains on the European markets, while resources shares also edged up 0.49% after Tuesday’s sell-off.
Polls in recent days showing rising momentum for the "remain" camp helped boost risk appetite in global markets, but according to Reuters many investors are still shunning trading as the vote remains too close to call, with an opinion poll published on Tuesday showing the "remain" campaign's lead has shrunk.
"We still have three polls on the UK referendum before the vote, and another shift back to Brexit will see risk appetite disappear quickly," Bernard Aw, market strategist at IG in Singapore, wrote in a note.
Wall Street was modestly higher on Tuesday evening, followed by the Asian markets, but the European markets were more cautious and gave up some of their earlier gains. Mining shares were the biggest gainers in London, as metal prices were higher.
The mood on the markets was also supported by comments before Congress by Federal Reserve chair Janet Yellen, which wiped the possibility of an increase in US interest rates off the table. Even a hike in September seems to be in doubt.
"A couple of months ago, Yellen was cautiously optimistic. Now she appears cautious while trying to be optimistic," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.
Barclays Africa [JSE:BGA] was one of the stars amongst the banking shares, gaining 3.23% to trade at R150.08. FirstRand [JSE:FSR] was 2.03% higher at R45.68 and Standard Bank [JSE:SBK] gained 1.83% to R127.65. Old Mutual [JSE:OML] was 1.41% stronger at R40.92.
In the industrial sector, Naspers [JSE:NPN] traded 1.61% higher at R2 219.17 but some of the other heavyweights in the sector were slightly lower. Naspers was supported by news that Tencent Holdings will lead an $8.6bn acquisition of gamemaker Supercell Oy, getting its hands on some of the industry’s most popular electronic games through potentially its largest-ever overseas deal. Naspers owns a 34% stake in China’s largest internet company.
Tencent is leading a group that will buy 84% of Supercell in a deal valuing the Finnish gaming house at about $10.2bn. It adds chart-toppers Clash of Clans and Hay Day to a Tencent portfolio that dominates the Chinese social media scene, but has made few waves abroad.
Among the other big shares, British American Tobacco [JSE:BTI] lost 0.73% to R913.16 and Richemont [JSE:CFR] dropped 0.69% to R90.13. At mid-morning on Wednesday SABMiller [JSE:SAB] was only 0.15% down at R913.16.
Anglo American [JSE:AGL] gained 1.49% to R143.81, but its subsidiary Anglo American Platinum [JSE:AMS], which lost more than 5% on Tuesday on a profit warning indicating earnings could be 20% lower, was unchanged at R359.99.
* Fin24 is part of Media24, a subsidiary of Naspers. Naspers has a 34% stake in Tencent.
