Strong rand caps JSE gains

Johannesburg - Shares on the JSE traded higher as emerging market shares rose the most in almost two weeks, with optimism the Federal Reserve will delay raising interest rates and an advance in crude oil reviving demand for higher-yielding assets.

The gains on the JSE were however much smaller than the emerging markets in Asia, as the big rand hedge shares were once again capped by a stronger rand which traded at R14.07 to the dollar by mid-morning.

READ: Rand outperforms global currencies ahead of rates move

By mid-morning the All-share index was only 0.22% in the black at 51 945 points and the Top 40-index 0.07% up at 45 463 points.

The Financial index was supported by the strong rand and by mid-morning was already 0.97% higher, while the Resources index gained 0.86% on the back of a lower dollar and stronger commodity prices.

The Industrial index, which includes most of the big dual-listed shares which earn most of their income in foreign currencies, was 0.30% down, and the weight of these big rand hedge shares held the market back.

The dollar fell from a two-week high on Monday, pushed down by a stronger oil price which rose on the back of speculation about Opec production controls.

Oil prices rose almost 2% on Monday, after Venezuela said Opec and non-Opec producers were close to reaching an output deal and as clashes in Libya raised concerns that efforts to restart crude exports could be disrupted.

Commodity-linked currencies including the rand as well as the Canadian, Australian and New Zealand dollars were all more than half a percent stronger in early trade.

Traders are 80% certain the Federal Reserve will refrain from raising interest rates when it announces monetary policy on Wednesday, helping to bolster the outlook for emerging market assets and pushing the dollar down even further.

“Investors are bargain-hunting as values are being found given the exaggerated drop last week,” said Jonathan Ravelas, chief market strategist at BDO Unibank in Manila.

The MSCI Emerging Market Index of shares rose 1.3% as of 07:13, headed for its biggest advance since September 6. The gauge had slumped 2.6% last week, its worst week since May. Almost five stocks rose for every two that fell.

Chinese shares on the Hong Kong stock exchange gained 2.2% on Monday but it did not support the Naspers [JSE:NPN] share price, which fell 1.26% to R2 425.00. Before Monday’s trade Naspers was already 2.73% lower over the previous seven days. Naspers owns 34% of Tencent, the Chinese internet giant listed in Hong Kong. Tencent traded 0.19% lower at HK$209.30.

SABMiller [JSE:SAB] was also 2.13% softer at R805.50, but Richemont [JSE:CFR] gained 0.69% to R81.79 and Steinhoff [JSE:SHF] was 0.70% stronger at R79.41. MTN [JSE:MTN] continued its recovery and traded 2.39% higher at R124.04 after it gained 3.24% over the previous seven days.

Sasol [JSE:SOL] benefited from better prospects for oil and traded 1.88% stronger at R382.05. Before Monday’s trade the share was already 3.31% higher over the previous seven days.

The firmer oil price also gave commodity shares in Europe a boost and Anglo American [JSE:AGL] benefited the most as it traded 2.11% stronger at R156.00. Glencore [JSE:GLN], which is now part of the Top 40 index, gained 0.71% to R35.25. BHP Billiton [JSE:BIL], which also has oil and gas interests, gained only 0.41% to R186.51.

Among the financial shares Standard Bank [JSE:SBK] gained 2.34% to R138.45 and FirstRand [JSE:FSR] was 2.03% higher at R47.81. Old Mutual [JSE:OML], which is listed in London, was a victim of the strong rand and lost 0.34% to R35.24.

Shoprite [JSE:SHP] recovered some of its recent losses and traded 3.65% higher at R187.0. The share pulled back more than 12% over the past 30 days after it reached an all-time high of R208.70 on August 11, on the back of strong results from its African interests.