JSE jumps 4% in its biggest one-day gain in three years
The JSE surged as much 4% on Thursday, in its biggest intra-day rally in more than three years after Jacob Zuma bowed to pressure to step down as head of state.
Four of SA’s banks — FirstRand, Standard Bank, Barclays Africa and Nedbank — added a combined R62bn in market value, with all of them reaching record highs.
The rally was broad based, from resources to industrial stocks. Even big rand-hedge stocks gained despite a stronger currency.
The rand powered to a three-year high to the dollar, providing a boon to locally focused companies, including retailers. The stronger currency brightens the outlook on inflation, which could open a window of opportunity for the Reserve Bank to cut interest rates once key event risks on the horizon have passed.
These include the budget, which Finance Minister Malusi Gigaba is supposed to table in Parliament next week. Ratings agency Moody’s is set to conduct a ratings review on SA shortly thereafter.
"The good news in SA is now official and, as expected, markets are reacting very positively with foreigners strong net buyers of shares," said Gerhard Lampen, head of online trading at Sanlam Private Wealth. "There is, however, the small matter of the budget. I think the budget is going to pop the euphoria bubble a bit. Tax increases, including VAT, are highly likely and that will hurt economic growth and company earnings."
Zuma announced his immediate resignation late on Wednesday, ending days of political drama, which caused both confusion and uncertainty. The developments led to the unprecedented postponement of the state of the nation address.
The all share was up a hefty 3.24% to 59,261.50 points at lunchtime, signaling clear market approval of Zuma’s departure, although part of the rally came as a result of international factors. The sharp weakness in the dollar translated into a big rally in commodity prices, which fed into resource shares.
Global equity markets continued their steady recovery, following a sharp sell-off over the past two weeks. The improvement in global stocks came even as US benchmark government bond yields — specifically the US 10-year note — rose to a fresh four-year high, above 2.90%.
"I imagine investors will still be somewhat cautious, despite the encouraging rebound we’re seeing, which will leave markets a little vulnerable to further drops," said Craig Erlam, senior market analyst at Oanda.
BHP surged 4% to R263.85, Anglo American 2.52% to R284.13 and Sasol 4.48% to R405.84. Kumba Iron Ore was up 4.76% to R363.43 and Exxaro Resources 4.46% to R147.03.
Bidvest, which is one of the better proxies of the local economy, surged 6.38% to R244.61, Imperial 8.42% to R279.18 and Barloworld 8.19% to R181.89.
Naspers, which is the biggest share on the JSE in terms of market weighting, rose a 5.35% to R3,339.64.
FirstRand leapt 6.09% to R75.11, Standard Bank 4.73% to R217.76, Barclays Africa 6.28% to R 202.89 and Nedbank 6.12% to R292.91. Old Mutual added 3.5% to R40.78, Sanlam 6.47% to R95.29 and Discovery 9.25% to R180.31.
Woolworths rose 4.54% to R66.59 and Mr Price 3.46% to R291.03.
Investment group Remgro jumped 4.04% to R238.91.
Even the embattled Steinhoff didn’t miss out on the gains, zooming up 7.77% to R5.69.