MONDAY, 6.30PM:
AMID the gloom and doom of the last three days’ trading, the Johannesburg Stock Exchange denied all odds to execute a sharp turnaround on Tuesday afternoon, gaining 1,2% by close of trade, reports SARAH BULLEN.
The edgy market opened flat for most of the morning session, with a slight uptick in afternoon trade. In the last hour of trade, however, most players were stunned when trade volume suddenly shot up, pushing all key indices into positive territory.
One dealer said that, although the sudden swing left most traders surprised, he could attribute much of the gains to a strong opening of the Dow Jones industrial average.
A further strong change in sentiment came when the repo rate fell from 23,985% to 20,5% on a floating rate after the Reserve Bank offered R400-million more than the estimated daily liquidity requirement of R11,6-billion, he said.
Deutsche Morgen Grenfell head of trading Chris Wilde said the spike was a lucky combination of a good New York session, the fall of the repo rate, and a stronger rand which, he said, is “massively oversold” at the moment. Wilde said further positive sentiment entered the market with an increase in arbitrage in futures — in which traders bought scrip rather than sold futures.
He cautioned, however, that the day’s firming does not indicate a total change in the current trend, and commercial banks might still announce substantial hikes in their interest rates, swinging the market downward again.
At close of markets, the all share index was at 6778, a rise of 94 points from Monday’s 3% fall to 6684. Financial shares ended firmer, with the financial index climbing 163 points to 12050, while the industrial index rose 127 points from Monday;’s close of 8024, t0 8151. The all gold index inched four points higher to close on 811.
Despite the apparent turnaround in the market, traders indicated a sense of unease with the constant volatility. “The market is on neither a bull nor bear,” one commented.
The bond market also looked to the lower interest rates and firmer currency to take its cue, closing stronger on Tuesday. South African bonds on Monday hit an eight-month low when the key R150 government bond passed the 15% yield. Tuesday’s small increase in the May 12-month consumer inflation rate to 5,1% from April’s 5,0% was ignored by the market as the currency and improved repo rate dominated trade. The Finance Ministry auctioned R300-million worth of R150s and R450-million of R153s.
The R150 was bid fairly aggressively, while there was far less interest in the R153. At end of trade the R150 offered a 14,860% yield, firmer than Monday’s 15,120%. The R153 closed the day on a 14,920% yield, up from the previous close of 15,160%.
The local currency stayed off its weakest levels on Tuesday, reaching a high of R5,4430 to the dollar, before closing at R5,4710. A number of traders commented that, rather than finding its level from the stronger repo rate, the currency market is reacting to the continued instability by trying to find a comfortable level. At 4.15pm, a pound cost R9,1111, up from Monday’s spot of R9,2092.