State bonds fell and yields climbed as SA's benchmark stocks booked their biggest daily gain in 16 months, breaking a three-day losing streak.
South Africa’s benchmark stocks booked their biggest daily gain in 16 months on Wednesday, breaking a three-day losing streak in a broad-based rally led by luxury goods group Richemont, which posted above-forecast five-month results.
Government bonds fell and yields climbed strongly in a largely corrective move after recent strong demand especially from foreigners had pushed benchmark yields to all-time lows.
The rand enjoyed a reprieve against the dollar, edging slightly higher in line with gains in the euro and largely shrugging off data showing South Africa’s central bank increased its gross reserves to $51.449-billion in August.
The JSE Top 40 blue-chip index advanced 3.89% to 27 202.81, its biggest daily rise since May 10 2010. The broader All-share index gained 3.35% to 30 514.6.
“I don’t think Europe’s troubles are over by a long shot but there’s speculation that America could push through another monetary easing package,” David Shapiro, a trader at Sasfin Holdings said.
Richemont, which also trades in Switzerland, was among the top gainers after the maker of Cartier jewellery said five-month sales jumped 35%. In reaction, shares in the company surged 7.56% to R39.25.
Elsewhere, Optimum Coal was up 1.32% at R37.50 after Glencore said it had further increased its stake in the coal miner to 24.7%.
Anglo American Platinum added 2.53% to R548.56, helped by a broad rally in the exchange and news that it has sighed wage deals with unions, averting a strike that could have hurt its output.
Remgro rallied 3.44% to R113.79 after the investment holding company said 15-month profit likely rose as much as 60%.
On the debt market, the yield on the 2015 bond was up 14.5 basis points at 6.47% compared with Tuesday’s close while that for the longer dated 2026 bond gained as much as 17 basis points to a session high of 7.915%.
Bonds have gained strongly in the past month, pushing yields to all time lows as the market priced in an increased chance the Reserve Bank could cut interest rates to boost a struggling economy.
“[Yields] were overdone on the downside for starters and then with the US markets having reversed some of their fortunes as well, we tend to follow suit,” said Renaissance BJM trader Ashley Dickinson.
“If you look at trends recently, most of the buying that has taken place has been foreign driven. Locals haven’t really been confident in the lower levels in the market. Generally your lower yields were actually initiated by foreign buyers and they have sort of stepped back a bit now.”
Latest data from JSE securities exchange shows foreigners bought nearly R11-billion worth of South African bonds in August.
Trading volumes on the secondary market were however light on Wednesday, said Leon Myburgh, sub-Saharan Africa strategist at Citi.
“We think the market was a bit long after the auction yesterday so there was some position unwinding,” he added.
The rand was trapped in a 10c band against the dollar for much of Wednesday’s session, hitting a high of 7.07. It was trading at 7.1490 by 3.54pm GMT, just 0.13% firmer than Tuesday’s close.—Reuters