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Johannesburg - Investors on the JSE at last joined the run on global markets, using the opportunity to pick up bargains among rand hedges which have been under pressure lately due to the strong local unit.
The rand continued its strong performance on Thursday morning, trading at only R13.45 to the dollar by mid-morning, but the big dual-listed shares were for once also in the black.
READ: Rallying rand returns to pre-Gordhangate levels
Resources were up sharply after the Federal Reserve left US interest rates unchanged and slowed the pace of future hikes, knocking the dollar and lifting commodity prices.
By mid-morning the All-share index was already 1.28% higher at 51 407 points and the Top 40 index was 1.29% stronger at 44 858 points.
While world markes were on a strong run this week, the All-share index lost almost 4% over the previous seven days as the rand's strong performance hurt rand hedge shares. The Industrial index, which includes most of these stocks, lost almost 7% over the same period.
By mid-morning on Thursday however the Industrial index was already 0.69% higher, while the Financial index gained 2.32% on the back of the strong rand and the Resources index rose 2.32%. The Gold index also benefited from the weaker dollar and lifted 1.63%. The gold price made the biggest advance in two weeks and traded at $1 333.30 a fine ounce.
Share prices worldwide rallied strongly on Thursday morning on the news that US interest rates were left unchanged. Although the Fed did signal it could hike rates by year-end as the labour market improved further, it cut the number of rate increases expected in 2017 and 2018. It also reduced its longer-run interest rate forecast to 2.9% from 3%.
Analysts now expect the dollar to remain under pressure for a longer period, as investors feel that any tightening of monetary policy in the US would be gradual at best.
This is excellent news for the rand, which gained again more than 1% against the dollar overnight and earlier traded as low as R13.39 to the dollar.
The unit is now almost 7% stronger than the R14.34 level it was at as recently as September 12, when the currency was under pressure sparked by a report that Finance Minister Pravin Gordhan was being investigated by police. This raised concern that his job was on the line and threatened the country’s investment-level credit rating.
Some analysts also think rand strength is the result of Anheuser Busch (AB) InBev buying rands to pay SABMiller’s [JSE:SAB] shareholders for their shares, if the proposed merger between the two beer giants is approved by SABMiller shareholders later this month.
Both beer giants, which have been under pressure lately, traded lower again on Thursday. SABMiller, which lost almost 9% over the previous seven days, at mid-morning was 1.80% lower at R750.75. As recently as May 29 the share traded at an all-time high of R990.00. AB InBev was 0.31% lower at R1 732.76, losing 3.4% over the previous seven days.
Among the other big rand hedges in the Industrial index, Naspers [JSE:NPN] traded 1.78% higher at R2 339.41 after losing more than 6% over the previous seven days. Steinhoff [JSE:SHF], which is more than 4% lower over the previous seven days and more than 12% over the previous 30 days, gained 0.82% to R77.75. MTN [JSE:MTN] was 2.24% stronger at R126.00.
Glencore [JSE:GLN], which was included last Friday in the JSE All-share index, on Thursday morning traded 3.82% higher at a new intraday 52-week high of R36.70. The share gained more than 4% over the past seven days.
South32 [JSE:S32], the other newcomer in the All-share index, was unchanged at R25.20, just below the 52-week high of R25.49 set on Monday. Before Thursday’s trade the stock gained more than 8% over the past 30 days and 24.6% over the past 30 days.
Anglo American [JSE:AGL] was 2.20% higher at R161.50 and BHP Billiton [JSE:BIL] 3.27% stronger at R192.76.
Banking shares were among the top performers on Thursday, with Barclays Africa [JSE:BGA] 4.73% higher at R155.78 and Standard Bank [JSE:SBK] 3% up at R141.87. FirstRand [JSE:FSR] gained 2.24% to R48.77.
