Picture: REUTERS
Picture: REUTERS

On Wednesday, finally, they came stampeding out of the JSE blocks like a pack of thoroughbred greyhounds, and not the mangy stock market curs they’ve been for so long.

Shares in cement maker PPC soared 16%, down-on-its-luck Steinhoff was up 21%, and steelmaker ArcelorMittal rocketed 46%. All of them, at one point in their careers, were JSE blue chips but are now languishing in the penny stock discount bin. But on Wednesday, they caught a whiff of the animal spirits that have gripped stock markets this year.

Steinhoff aside, it may be that companies like PPC and Nampak, another one-time portfolio pillar, have simply been too harshly punished, and investors, stuck with no real place to go other than equity markets, are willing to take a punt on their recovery. (Not to mention the fact that, at least in the case of companies like PPC, there are tangible assets of value.)

For Bloomberg columnist John Authers, it’s quite clear: “We are in the presence of a classic cyclical recovery,” he wrote in his newsletter this week.

Exhibit A, says Authers, “is the performance of South Korean and Taiwanese stocks. The two great industrial exporters of north Asia, both of which benefit from their place in China’s slipstream, are leading all others for the year. South Korea’s Kospi index, in particular, has taken off in the last few weeks.”

He cites another “telltale symptom” — the price of iron ore, which has enjoyed a truly staggering comeback this year. “What is unfolding, then,” writes Authers, “is a remarkable rebound from a historically serious economic hit.”

But a word of caution: “We should all be happy to take this news, and put up with the corollary. As stock markets around the world are actually up in such a year, it is obvious that they have borrowed returns from the future. That is fine; it’s what stock markets are supposed to do. But it means that we should moderate expectations for the next few years.”

The money flow into areas of the market other than the dollar and gold isn’t great news for SA’s gold producers, which, having raked in money from the combination of a weaker rand and a high gold price, are now experiencing the exact opposite.

In August, the rand/gold price topped R1.1m per kilogram; today, gold producers are getting about R885,400.

From gold to crypto

But there is also an intriguing twist to the recent sell-off in gold and gold stocks — and that is bitcoin’s resurgence. In fact, writes Bloomberg here, US bank JPMorgan believes that there will be a “major shift” from gold to crypto as an asset class.

“The trend poses a problem for bulls in precious metals markets over the coming years if investors move, even a small slice, of their allocations away from gold and into crypto,” it warns.

Since October, $2bn has flowed into the Grayscale Bitcoin Trust, “a listed security popular with institutions”, compared to outflows of $7bn for exchange traded funds backed by gold.

And if you’re scratching your head over the rand’s bull run (though bear in mind we aren’t actually close to where we ended last year, at R14.01 to the dollar), it seems that the appetite for junk-rated emerging-market bonds is also on something of a tear.

According to this Financial Times article, Montenegro this week sold more than €2bn of orders for a seven-year bond — after Morocco’s steamy Tuesday bond sale where buyers picked up $3bn worth of 30-year debt, notwithstanding the fact that it was stripped of its investment-grade status by Fitch in October.

“I’ve not seen it as busy in December ever before,” says Stefan Weiler, head of Central and Eastern Europe, Middle East and Africa debt capital markets at JPMorgan. “The market is red-hot for higher-yielding assets, and lower-rated sovereigns are particularly interesting for investors.”

If that means a rand below R15 for a little longer, which translates into a lower fuel price, among other benefits, then bring it on.

*Talevi is the FM's Money & Investing editor.

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