It is almost inconceivable but the JSE is about to round off its strongest quarter in almost two decades! However, the logic behind this rally is clearly the influence of the coronavirus pandemic when one takes a closer look at the shares most responsible for driving the market higher. Strange but true.
The FTSE/JSE Africa All Share Index has climbed 22 percent since the start of April, its best performance over any quarter since 2001. Emerging-market shares, heading for their biggest gains since 2009, are up 18 percent . South Africa’s benchmark ranks eighth over the period among 93 major global indexes tracked by Bloomberg as of Monday’s (29 June) close. It’s within 5 percent of erasing 2020’s losses.
AngloGold Ashanti Ltd. and Gold Fields Ltd. are among the leading index-point contributors to the gains, as the uncertain times push traders toward the haven of bullion. Tech investor Naspers has prospered as the Covid-19 lockdown strengthened the hand of partly owned Chinese online giant Tencent Holdings, spurring it to record highs in Hong Kong.
Mining behemoth Anglo American has benefited as central bankers around the world release massive stimulus to revive battered economies.
“If the global economy continues to re- cover, combined with the money printing that is happening and with central banks cutting interest rates in most markets, there is a lot of stimulus that should sup- port higher valuations,” said Peter Takaendesa, the head of equities at Mergence Investment Managers in Cape Town
Sasol has outpaced all other gainers over the quarter, jumping almost fourfold as some investors bet that asset sales, cost- cutting measures and recovering oil prices will reduce the need for a painful rights offering by the fuels and chemicals producer.
Sasol has also been among the shares to benefit from buying by first-time mom- and-pop traders who, with an unprecedented amount of time on their hands during the national lockdown, were lured to the market by beaten-down valuations.
“We have seen an increase in appetite for stock broking-type of accounts, where people have discretion to purchase shares like Sasol,” according to Renzi Thirumalai, the head of investments at FNB Wealth & Investments. “Quite a few shares were at depressed levels, so there were a lot of opportunities there.”
However, the fact that the economy and the stock market seem to be singing from different hymnals is something to be wary of in these uncertain times. Longer term the stock market may react to an economy plagued by unemployment and business bankruptcies. Just be careful out there people.