Rand, JSE surge to 1-month high as GNU formation drives risk-on sentiment

The JSE All Share Index surged 3.7% to more than 79 909 points by 5pm, its highest since May 20. | Supplied

The JSE All Share Index surged 3.7% to more than 79 909 points by 5pm, its highest since May 20. | Supplied

Published Jun 19, 2024

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The JSE yesterday rallied to a 1-month high to within a touch of 80 000 points buoyed by “hot money” in resources, financials and industrial stocks, while the rand strengthened on peaceful establishment of the Government of National Unity (GNU).

The risk-on sentiment on the JSE was driven by expectations that the GNU will build on the relationship that the government has had with the private business sector in improving freight, electricity supply and crime prevention, broadening the relationship to strengthen economic growth and the rule of law.

President Cyril Ramaphosa will be sworn-in for his second term today after the formation of the GNU, which includes five parties and represents over two-thirds of the National Assembly seats, proceeded peacefully in spite of challenges, giving the domestic financial markets a strengthening momentum.

The JSE All Share Index surged 3.7% to more than 79 909 points by 5pm, its highest since May 20, as investors returned from a long weekend and responded positively to South Africa’s political developments.

Sasol led the charge on the JSE, rising 10.4% to R128.02 a share followed by Truworths at 10.2% to R96 a share while TFG rose 9.5% to R130.38 a share.

Makwe Fund Managers’ chief investment officer, Makwe Masilela, said this was probably the first time in a long time that the JSE had seen so much green.

Makwe said it was also more of an international theme because there were no real sellers this time around as investors think that the momentum will continue.

“And as the momentum continues, then stocks will continue to win. So we are also getting a boost from the fact that markets are getting a better, full reaction to the developments that we’ve been seeing locally since Friday,” Makwe said.

“Remember, yesterday it was a holiday and other markets were open. So I think it’s now that we are fully reacting to the developments that we see on the political front. But markets will continue to keep a keen interest or an eye on the developments when it comes to the Cabinet formulation.”

Two more parties have joined the GNU – the Patriotic Alliance (PA) and GOOD – as the focus now shifts to Ramaphosa’s Cabinet pick, which is expected to be dominated by ANC and DA members.

Makwe also said the JSE was getting a boost from the fact that momentum internationally continued to be positive.

“And maybe just to put it in context, this is hot money. Now they are happy with us and at the click of a button, they’ll buy our stocks. But for whatever reason, that does not mean that they’ve signed a contract that will be here with us forever,” he said.

“If another region gets to be more attractive, the guys won’t hesitate to dump us and go to that particular region because they’re just looking for an opportunity to make good returns. My point here is this is just hot money. It can just come in as much as it can go out any time. But so far, I guess let’s celebrate the good news.”

Meanwhile, the rand also powered to a 1-month high, rising by 1% to R18.08 and the highest since May 21 as gold also pared earlier gains to trade near the $2 310 an ounce mark, not far from the over-one-month-low of $2 290 touched on June 4.

Investec chief economist Annabel Bishop said the rand was likely to see further momentum towards the key R18.00/$1 resistance level, although it would be a difficult barrier for the domestic currency to sustainably break through.

“The rand is likely to see pressure to track stronger this week, making up for lost ground as the pre- and post-election uncertainty hampered the domestic currency from making prior gains on waning risk aversion in global financial markets,” Bishop said.

“The rand’s direction will continue to be determined by global events, particularly the US markets, but it is likely to tick stronger this week on the improving political environment for South Africa, supportive for stronger growth.”

BUSINESS REPORT