ALLAN SECCOMBE, Johannesburg | Wednesday
A RECOVERY in resource and banking stocks on renewed investor appetite for the issues pushed the Johannesburg bourse to levels not seen in three weeks during robust Tuesday trade, brokers said.
”We have seen a very nice rally in the resource sector and the market appears a lot more solid than it has for a while,” a trader said.
The top-20 resource stocks index, which groups the country’s top natural resources counters, leapt up a hefty 4% to 11 184.5.
The index was driven hard by an 11.24% hike in resources company Billiton to R29.20 a share. Billiton is the world’s third largest aluminium producer.
Analysts said a bounce in the aluminium price off recent lows and a strong showing by world number one aluminium producer Alcoa on Wall Street on Monday were behind Billiton’s strong run.
Global forest products group Sappi added 6.15% to R51.80 on volume of more than 1.5 million shares.
Traders said the company was following a trend set by international paper companies, which bounced 20% as sentiment switched from technology stocks to ”old economy” issues.
The bank index vaulted 4.2% to 12 303.3, with the country’s largest retail banker Absa adding an impressive 7.53% to R25.70 as investors snapped up stock in a sector seen as oversold.
The index came under pressure after the Reserve Bank raised its repurchase rate or the rate it lends money to retail banks 25 basis points on October 17 to 12%.
Investors were apprehensive banks would lift their lending rates from 14.5%, raising the spectre of bad debts which would affect banks’ margins.
Absa had the double whammy that it was also exposed to textile and garment company Coastal Group, which applied for liquidation on October 25.
The counter fell to R23.00 on October 26 and began to look very cheap, a trader said. The key all-share index ended a busy day up 222.5 points at 8 111.5, generating turnover of R1.9bn. The all-share index was last at these levels on October 10.
Advancing issues outpaced decliners 234 to 138. – Reuters