THURSDAY, 6.00PM:
THE Johannesburg Stock Exchange bucked bad news from the currency and bond markets to gain 1,45% on Thursday, reports Sarah Bullen.
Despite the gains, the market sentiment remained negative, Deutsche Morgen Grenfell head of trading Chris Wilde said. The rand was the problem, said Wilde, playing off its “back foot” since the morning, when the Reserve Bank announced a foreign exchange open position of $22,5-billion at the end of June, up from May’s $17,9-billion. The $5-billion rise in June was matched by a similar rise in May, Wilde said, implying that the Bank has spent over $10-billion in its failed bid to prop up the rand.
The market also experienced a drain in confidence with the perception that the Bank had gone back on its word not to further intervene in the rand by using forward cover, Wilde said.
Barnard Jacobs Mellet trader Kevin Brady said the rise in the market was largely driven up by the mining sector and rand-hedge stock.
Accordingly, gold shares rose sharply, with the all gold index rising 69 points to 993. At market close the industrial index was 49 points up at 8120. The financial index, however, shed 51 points to 11619, while the all share index closed 99 points up on 6921. Brady said a surprise twist in the market was the rise in consumer stock, usually hard-hit in a bear market. The only explanation for the rise, he concluded, could be an overflow of good sentiment from hedge stock.
The rand had a turbulent day, starting off badly and getting worse when the Japanese government announced a disappointing package to address its banking system’s bad debts. General optimism in the Asian currencies dissipated shortly after the announcement of the package, which details a “bridge bank” that will be established to oversee the crisis. At 4.30pm the rand was at R6,2925 to the dollar, and R10,3700 to the pound.
Bond markets again tracked the falling rand, with the R150 spiking to a 15,80% yield around lunch. At close of trade the yield on the R150 had fallen slightly to 15,7100%.