JSE set for uptick as world markets wait for Fed announcement

The JSE is set for a slightly positive start on Wednesday as Asian markets and Tencent nudged up, while investors cautiously await the US Federal Reserve’s latest policy decision later today with an interest-rate hike widely expected.

“Markets want signs of a pivot. And that augurs for some euphoria if it is received, but misery if not. Powell has a tough job later on,” ING’s ​​Asia-Pacific head of research, Robert Carnell, and senior economist Min Joo Kang said in a note.

The Hang Seng gained 1.74%, the Shanghai composite 0.88%, while the Nikkei in Japan was flat. Year to date, the Hang Seng is down almost one-third (32.44%), the Shanghai composite close to one-fifth (17.54%) and the Nikkei 5.58%.

Tencent, which influences the JSE via Naspers and Prosus, advanced 0.62%, but has still close to halved (49.54%) in 2022.

China to reopen?

An unverified report on social media on Tuesday that China had set up a so-called Reopening Committee to look into possibly reopening the world’s second-largest economy by March 2023 triggered stronger commodity currencies, a weaker dollar and sent the markets in China and Hong Kong surging.

This despite the country maintaining its strict zero-Covid policy and no signs of letting up during the recent 20th National Congress of the Chinese Communist Party (CCP). China foreign ministry spokesperson Zhao Lijian later said he was unaware of this committee.

“A China reopening is the biggest ticket in town, and it’s better to show up early rather than late to the reopening party,” SPI Asset Management managing partner Stephen Innes said in a note on Wednesday.

“More credible media reports also poured cold water on the speculation, noting that the country has actually ramped up its lockdowns after the party congress ended due to rising Covid cases,” National Australia Bank (NAB) currency strategist Rodrigo Catril said in a note.

The markets in Japan remain wary ahead of the Fed’s announcement with a 75 basis point (bps) interest-rate hike is expected.

“Japan’s finance minister Suki said finances would become exceedingly difficult if the Bank of Japan [BOJ] hikes rates, as that will sharply increase the cost of funding public debt. That sums it up for central banks caught between a rock and a hard place,” Innes said.

In local market news, the JSE ended firmer on Tuesday after losing some steam by the close, indicating a degree of investor caution in the lead-up to the Fed’s meeting.

The all share ended 1.11% higher at 67,414,27 points, its best level since early September, led by heavyweights Naspers and Prosus, which each gained more than 8% to R2,056.35 and R862.38, respectively.

US markets ended slightly lower on Tuesday, as the Nasdaq retreated by 0.89%, the S&P 500 0.41% and the Dow Jones 0.24%. The Nasdaq has lost 31.21% so far this year, the S&P 500 close to one-fifth (19.61%) and the Dow Jones just over one-tenth (10.75%).

The rand strengthened by 0.90% against the dollar as it traded at R18.06. The rand has depreciated by 11.71% against the greenback so far this year.

In commodities, the price of Brent crude rose 1.06% to $95.72 a barrel, platinum 0.76% to $951.20 and gold 0.22% to $1,650.00/oz.

In corporate news, pharmacy chain Dis-Chem, which has recently come under fire for a letter from its CEO placing a moratorium on employing white people, will release its interim results on Wednesday.

The company said last week that it expects its headline earnings per share (Heps), a widely used measure of profit that strips out impairments and one-off items, to increase 43.1%-45.4% to 69.7c-70.8c in its results end-August.

gousn@businesslive.co.za