JSE up in morning trade, eyes record

THE JSE neared its historic high yesterday as commodity prices surged on signs of a sustained recovery in the US and other developed markets, boosting mining heavyweights Anglo American and BHP Billiton .

At 11h00 on Tuesday, the JSE all share index is up 0,2% to reach 32806.66.

Analysts said global commodity prices rather than local retail stocks were most likely to sustain the JSE in coming months, positioning the resource-heavy exchange for a sustained rise despite a general softening in emerging-market bourses.

An end to street protests in Egypt, which have cast a pall over developing markets in recent weeks, also buoyed the all share index. Resource shares would "drag" the bourse past its record level, David Shapiro, a director at Sasfin Securities, said yesterday.

The all share rose as much as 0,7% to 33122,43 points before reversing gains to close 0,3% weaker at 32800,23 points — just 432,66 points off its historic high achieved on May 22 2008.

Global stock markets plunged from the second half of 2008, as credit markets were brought to a standstill by the collapse of the US subprime housing market.

Anglo gained for a sixth day, up R5,25 , or 1,5% to R393 . BHP Billiton rose 0,1% to R293,83 .

Anglo Platinum , the largest producer of the metal, said yesterday that its profit improved threefold last year on higher prices, and a unit disposal that boosted income .

Copper rose to records in London and New York yesterday after company mergers signalled that the US economic recovery was continuing and following concern that potential power blackouts may cut mine output in Chile, the world’s largest producer.

World stocks also rose, touching a 29-month high on US company merger news, rising commodity prices and flows into developed economies as investors bet on a stronger global economy. US 10-year Treasury yields rose to levels not seen since last May.

The higher yields supported the dollar, which rose to two-week highs against the euro after a bigger than expected fall in German industrial orders prompted investors to book profits on the single currency’s new year rally.

Due to their exposure to higher commodity prices and the weaker rand, diversified miners such as Anglo American had better growth prospects in an inflationary environment, Andrew Todd, a trader at Imara SP Reid, said.

"There’s been a big switch away from retailers into resources," he said.

World equities as measured by the MSCI all-country world index advanced 0,33% after gaining 2,2% last week. The index is up 3,4% so far this year, while the MSCI emerging markets index is down 2%.

Data from fund tracker EPFR Global showed investors pulled out $7bn from emerging-market equity funds in the week of February 2, their biggest outflow in three years. Much of that is flowing into developed markets.

The JSE’s impetus to move beyond its record would not come from local companies, Mr Shapiro said, because of lingering emerging market jitters.

The rand pierced the strong R7,30/$ technical level twice last week. Dealers, however, expected the currency to continue its recent poor performance, given central bank intervention in the market.

The Reserve Bank has stepped up its foreign reserves accumulation in recent weeks in a bid to limit gains in the rand. The local currency stemmed its decline against the dollar yesterday, rising for a second day, up 0,3% to R7,23/$, from R7,25/$ on Friday.

Data from the Reserve Bank showed SA’s gross reserves rose by $1,6bn at end of last month, with currency reserves up $1,9bn, pointing to the Bank’s increased dollar purchases.

The rand, which has weakened 9,1% against the dollar this year, further increases inflation risks. The currency had fallen because of relaxed foreign exchange control and a "very aggressive" Reserve Bank, Jeff Gable, Absa Capital economist, said.

Since the start of 2009 the rand has gained more than 28%, with governor Gill Marcus conceding that the Bank’s forays into the foreign exchange market had had little effect. With Reuters







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