MICHAEL METELITS, Johannesburg | Wednesday 5.00pm.
SIGNIFICANT over-provision of the daily tender by the South African Reserve Bank sent a positive signal to the markets on Wednesday, boosting the JSE, bonds, and the rand. The good news came on top of yesterday’s current account surplus release.
While the current account surplus demonstrates SA’s fundamentals are good in comparison with other emerging markets, the over-provision of cash to banks signalled an easing of monetary policy, and pushed the repo rate down to 14,915%.
A drop in rates would come in the teeth of an expected hike by US regulators on Wednesday.
The all share closed up 63 points or 0,90% on the good news, while industrials rose a comparatively modest 37 points or 0,49%. Financials jumped on the interest rate news, picking up 128 points or 1,29%, and even gold managed a 1 point or 0,10% rise in the face of looming IMF gold sales.
Bonds celebrated the repo news with significant gains. The benchmark R150 bond grabbed 13 basis points to finish at 14,50% from Tuesday’s 14,63% close. Dealers naturally attributed the gains to the sliding repo rate.
The bond gains and other indications of financial health, including interest rate news and Tuesday’s Balance of Payments surprise pushed the rand to R6,01 to the dollar from Tuesday’s R6,04 mark.
Internationally, Asia felt the sting of some ill-timed remarks by Masaru Hayami, head of Japan’s central bank, to the effect that existing ultra-liberal monetary policy could change. Traders, predictably, did not like this, and responded by selling everything they could get their hands on.
The result was a 253 point loss on the Nikkei-225, or 1,42%, while Hong Kong’s Hang Seng hit the skids for 233 points or 1,70%.
Europe was mixed, as traders waited for news from the US Federal Reserve. London’s FTSE-100 slipped 8 points or 0,13%, while Frankfut’s DAX picked up 8 for a gain of 0,14%. Paris’ CAC-40 managed an 19 point rise to grab 0,42% on the day.