US-China trade-war truce offers hope to JSE stocks
Sasol and Naspers were the biggest beneficiaries of the JSE’s rally on Monday, with their combined market value jumping R72bn — more than Aspen’s current valuation — as hopes of a truce in the trade dispute between China and the US lifted stock markets across the world.
The prospect of detente between the US and China sent commodities surging, with a 5% rise in the oil price boosting Sasol, the sixth most valuable company in the local bourse, by 6.82% to R434, its biggest jump since January 2016.
Naspers, Africa’s most valuable public company, jumped 4.54% to close at R2,888.51 a share, after losing 2.02% on Friday when it released interim results that fell short of forecasts.
In currency markets, the rand gained 1.2% to R13.7038/$, adding to a jump of almost 7% in November, which was the biggest in 2018 so far. Emerging markets have also been supported by speculation that the Federal Reserve will slow the pace of US rate increases.
The prospects of a full-blown trade war between China and the US that would slow the global economy has been one of the biggest drags on emerging-market assets in 2018.
The rand dropped 1.5% on Friday, ahead of the G-20 meeting in Argentina, and the rally reflected relief that the gathering did not end with an escalation in the China-US dispute.
Naspers, which accounts for about a fifth of the all share index, tracked gains in its main asset, Chinese internet behemoth Tencent, in which it holds a 31.2% stake. That share closed 4.1% up in Hong Kong.
Major European and Asian stocks were all up more than 1%, while the all share added 2.72%, its best performance since October.
Naspers, which reached an all-time high of more than R4,000 in November 2017, could rebound further if the world’s two largest economies make more progress in defusing trade tensions, said Ernesto Gruhn, technical analyst at Momentum Securities.
“A move back beyond R3,650 is a realistic outcome should the US abstain from the suggested additional tariff hikes and ‘walk back’ the current tariffs which are in place,” Gruhn said.
Analysts said that the relief rally in equity markets was somewhat larger than expected, as the truce between the two countries might only be temporary. China has promised to increase the amount of goods it imports from the US, while the latter has pledged not to levy further tariffs.
Some of the thorniest outstanding issues, however, have not been addressed, such as those on intellectual property protection and forced technology transfers.
“If there is further progression over trade tensions between the US and China, then this has the potential to create a heavy market rally before trading wraps up for 2018,” said FXTM head of global markets strategy Jameel Ahmad.
Oil surged 4.28% to R61.62 a barrel shortly after the JSE closed on Monday, but motorists could still get further price cuts, with the rand price 34% lower than its October peak.