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Johannesburg - Emerging markets were still under pressure on Monday as the spike in US bond yields continued unabated, but a strong run by the Resources index on the JSE pulled the local market higher.
Investors were also looking for buying opportunities after Friday’s sharp drop, when the JSE’s major indices lost more than 2%.
The intraday graphs of all the important indices were still solidly higher at mid-morning, but were however again pointing downwards after a sharp upward spike in early trade.
Investors are still concerned about rising US bond yields, which reached their highest levels this year on concerns that US president elect Donald Trump’s economic policies will lead to higher inflation and a bigger budget deficit, which will force the Federal Reserve to hike US interest rates sharply.
Just two days of selling last week wiped out more than $1trn across global bond markets, the worst rout in nearly one-and-a-half years, according to Bank of America Merrill Lynch.
The spike in bond yields could lead to an outflow of capital from emerging markets back to the US, where the risks are perceived to be much lower.
This supports the dollar which on Monday traded at its highest level in nine months against a basket of currencies, hurting the rand. The local currency traded 1.87% softer at R14.37 to the dollar at mid-morning after reaching as high as R13.18 a week ago, before Trump was surprisingly elected as US president.
The strong rand is usually a bonus for the dual-listed shares on the JSE, which represent more than half of the market’s capitalisation, as these are worth more in rand when the currency is weak.
The result was that the All-share index at mid-morning was 0.87% higher at 50 731 points after reaching 50 900 points in earlier trade, while the Top 40 index was 0.91% stronger at 44 398 points.
The overall indices received strong support from the Resources index, which gained 1.7% with the dual-listed commodity giants sharply higher.
Resources shares which are also listed in Europe rose more than 10% on Friday before paring some gains, on expectations that US president elect Donald Trump will keep his election promise to spend $trn on infrastructure over a decade.
Investors were not perturbed by Bank of America Merrill Lynch's warning that the sector is now "overbought" after the recent strong rally.
The three international commodity giants listed on the JSE were all trading at new 52-week highs on Monday. BHP Billiton [JSE:BIL] gained 3.47% to reach a new high of R242.67, while Anglo American [JSE:AGL] firmed 3.36% to set yet another 52-week high of R213.60. Glencore [JSE:GLN] was 3.61% higher at R51.81.
Before Monday’s sharp increase, Glencore gained more than 23% over the previous seven days while Anglo American and BHP Billiton were both more than 12% stronger over the same period.
Lonmin [JSE:LON] was 10.79% higher at R37.69, while Kumba [JSE:KIO] gained 8.85% to R177.50.
The Gold index was however 2.05% lower as the rampant dollar pushed the gold price even further down to $1 226 per ounce. It has lost more than 6% since Trump’s election a week ago, and the Gold index is trading almost 13% lower.
At its current level of 1 530 points, the Gold index is almost 48% lower than the peak of 2 950 points reached earlier this year, but still 36% higher since the beginning of the year.
AngloGold Ashanti, which lost more than 13% of its value over the previous seven days, was 0.31% softer at R168.93. Gold Fields [JSE:GFI] lost 2.66% to R49.74 and Sibanye [JSE:SGL] was 0.54% softer on R34.68.
Naspers [JSE:NPN] stabilised, trading 0.5% higher at R2 096.12 after losing more than 4% on Friday. Friday’s drop was initiated by news that Chinese internet giant Tencent is giving its employees more than HK$1.7bn ($220m) worth of company shares to help celebrate its 18th anniversary. Naspers owns 34% of Tencent. The Industrial index was 0.52% higher at mid-morning.
The Financial index traded 0.87% higher, with Standard Bank [JSE:SBK] gaining 1.55% to R145.76 and FirstRand [JSE:FSR] 0.86% up at R49.12.
