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Johannesburg - The US Federal Reserve announced the 25 basis-point hike in US interest rates everybody has been anticipating for months on Wednesday, but the news did not sent the market into a tailspin on Thursday as some have feared.
In fact, markets all over the world strengthened quite considerably as all the possible bad news has been discounted already and Wednesday’s announcement provided more certainty.
On the JSE the gains were substantial, with the All-share index gaining 2% to 49 398 points and the Top 40 index trading 2.06% stronger at 44 601 points. All the other major indices were also higher.
On Wall Street the Dow Jones increased by more than 1% after the hike was announced on Wednesday, and all the major markets in Europe strengthened by over 2% on Thursday morning. Even Asia's emerging markets were stronger.
Analysts said last week's retreat in stocks set the stage for a rally.
"The market got oversold a bit and is now going through a bounce that I think will continue once the Fed will do what most people believe they're going to do, that's raise rates," said Sam Stovall, chief investment strategist at S&P Capital IQ.
Investors were also encouraged by comments from Fed chairperson Janet Yellen that further monetary tightening would be gradual and data-dependent. It is however reasonably certain that there will be more hikes in the light of an improved economy and labour market.
On the JSE investors shrugged off the news that rating agency Moody's cut its outlook on South Africa to "negative" from "stable" late on Tuesday, citing structural challenges in the mining industry and increasing political pressures on the budget.
Even the rand performed reasonably strongly after weakening initially against the dollar. By midday the unit was 0.44% up, trading at R14.88 to the dollar.
The two major indices on the JSE were well below their opening levels at the beginning of the year last week, when local markets were sent reeling by President Jacob Zuma playing musical chairs with the ministry of finance.
But by Thursday midday the Top 40 index was again just more than 2% higher for the year, trading at 44 601 points against 43 96 points at the beginning of the year. At 49 398 points the All-share index was still about 0.6% lower than the year’s opening level of 49 770 points.
Both indices are however still more than 10% below the highs reached in April this year, when the All-share index traded at 55 188 points and the Top 40 index at 49 081 points.
In very early trade on Thursday morning the All-share index was more than 3% higher than Tuesday, but then moved sideways or slightly downwards for the rest of the morning before turning upwards again at midday.
Financial shares continued their recovery after last week’s bloodbath in response to Zuma’s actions. The Financial index was another 3.81% up, with Standard Bank [JSE:SBK] gaining 6.52% to R115.91 and FirstRand [JSE:FSR] trading 5.335% stronger at R44.24. Barclays Africa Group [JSE:BGA] was 1.74% up at R144.80 after the market shrugged off reports that Barclays might reconsider its exposure to Africa.
Sanlam [JSE:SLM] gained 4.13% to R54.45. The stock was the busiest on the JSE in terms of volume, with more than 4.3 million shares sold for R234m in more than 4 300 transactions. Standard Bank was the second busiest.
Property shares, which were also under pressure last week as Zuma’s decisions pushed up bond rates, recovered further on Thursday. Growthpoint [JSE:GRT] was 4.10% higher at R32.10 and Redefine [JSE:RDF] gained 2.23% to R9.61.
The Industrial index gained 1.82%, supported by higher European markets. Among the heavyweights Naspers [JSE:NPN] gained 3.20% to R2 084.73 and Richemont [JSE:CFR] traded 3.28% stronger at R111.01. British American Tobacco [JSE:BTI] was 1.07% higher at R841.88 but SABMiller [JSE:SAB] lost 0.53% to R910.07.
Telkom [JSE:TKG], which announced an increase of 13.9% in headline earnings last week, performed strongly and traded 5.75% higher at R64.40. The company’s revenue from mobile customers rose by 44% while the income from fixed lines was 1.5% up, due to an increase of 10% in data.
MTN’s [JSE:MTN] recovery after the share price was hammered by the big fine imposed on it by the Nigerian authorities continued on Thursday morning. The stock was at one stage more than 8% higher and at midday traded 6.27% stronger at R138.15.
