JSE jumps over 5%, Sasol slides 11%

The JSE All Share Index (Alsi) surged as much as 5% on Thursday morning, buoyed by higher gold prices and a drop in oil prices.

At the same time, Sasol slid 11.26%, hitting R238.25 at 10:05am on Thursday morning. 

Alsi 

Precious metals miners rose, with the Resource Top Ten up more than 8%. 

The biggest winners were AngloGold Ashanti, up more than 13%, Goldfields, up 10.76%, Harmony, up as much as 12%, and Northam, up 9.4%.

On Wednesday, gold gained 3.3% to close at $4 060.02/oz, as a weaker dollar boosted demand for the safe-haven metal following US midterm elections, in which Democrats won back control of the House and Senate.

Read: Gold extends rebound above $4 100 as dollar and yields decline

A combination of factors has led to the JSE’s surge: the US midterm election results, the expected decline in ANC performance in South Africa’s local elections, and Chinese stimulus measures, says Peter Armitage, CEO and co-chief investment officer of Anchor Capital. The biggest reason for the rise in the JSE All Share Index is Trump’s massive loss in the US, which has led to a lower oil price, he says.

“Global markets have also picked up quite strongly on that.”

With US President Donald Trump and his Republican Party weakened, Brent crude fell 8.7% on Wednesday to settle at $94.62 a barrel, as hopes of an early end to the US-Israeli war with Iran eased supply concerns.

Read:
Brent crude plunges 10% after Trump midterm rebuke
Oil collapse is good news for inflation

Brent crude 

Following Trump’s defeat and a vote against the Iran war, “the world has moved into a more risk-on phase”, says Armitage. That leads to money moving into emerging markets like South Africa and into South Africa’s banks, which Armitage called “cheap”.

“When foreigners play in our markets, banks are the first thing they buy.”

The financial index had risen 4.27% at 11:31 on Thursday morning.

Additionally, the Chinese have in recent days announced further stimulus measures and have been buying into stock market indices, he says.

This led to an increase in the price of Naspers, which still has an outsized influence on the JSE. Naspers owns, through its investment arm Prosus, holds around a 22.66% stake in Chinese technology giant Tencent.

Naspers’s share price was up 10.70% to R779.57 at 11:30 on Thursday morning.

Gold makes up about 20% of South African markets, explains Armitage, which is why the JSE is benefiting from the higher gold price.

The market is also seeing expected local government election results quite favourably, with the ANC decline linked to the possibility of improved economic growth.

Speaking of Trump’s loss he said, “It’s just like a big sigh of relief from markets.”