The JSE Securities Exchange, currently trading at record levels of about 14 000, ”has got the legs” to breach 15 000 points, Mark Wurr, the head of trading at Global Trader 24/7, said recently.
At 14  000 points, the JSE Securities Exchange is valued at a shade less than R2-trillion, having added a whopping R700-billion since its low point in April 2003.
Wurr notes that rand strength has exposed new stocks, especially in retail. A stronger rand has made imports cheaper. This has allowed retailers to fill shelves with competitively priced goods, which has in turn boosted profits. Retailers such as Edcon, which recently passed the R1-billion mark in profits for the first time, heavyweight JD Group and others have lifted the bourse.
The drivers have been across the board.
Performers such as Telkom, a top 40 stock, also boosted the JSE Securities Exchange. This week, following its results announcements, the share reached record levels of R120, a 450% increase on its R28 listing price of two years ago.
Even indices such as gold, currently in crisis in South Africa, and information technology, ailing not too long ago, are up 1,7% and 2,86% respectively. We live in interesting times indeed.
For those times to continue, though, a lot hinges on the global economy and the rand.
Martin Jankelowitz, head of market research at Investment Solutions sees ”tangible signs of slowing global momentum”. This is largely owing to negative or, at best, mixed economic data coming out of the United States and Europe.
”Investors are focusing too much on the ‘economic noise’ or too much negative data and declining momentum,” Jankelowitz says, but notes that, ultimately, ”investors trade asset classes, not economic variables”. He argues that earnings delivery remains strong if investors focus on absolute, rather than relative, levels.
Amid all the gloom, the JSE Securities Exchange joins Switzerland, and even beleaguered Germany, in testing new highs. Research firm Equinox attributes this to a rally in bond markets, the dollar regaining strength against other currencies and the correction of oil, before this week at any rate. But it identifies complacency on matters such as inflation, contracting real interest rates in the United States and the markets’ tendency to oscillate between extremes as some of the risks to the current rally.
In South Africa the fortunes of the JSE Securities Exchange will be driven by the rand, and Equinox reckons ”a movement to R7,30 is more than a possibility”. This week a weaker rand has aided the rally to 14 000. The rand fell from R5,92 to the dollar in early May to R6,92 at the beginning of June.
Jankelowitz notes that in South Africa, the recent Barclays-Absa deal is the single most important indicator of confidence in the economy’s outlook.
He says that the most important challenge is for the economy to be more balanced and have the export sector contributing more to job growth. ”This can happen if the rand experiences some orderly depreciation.”
The good times
Key indices move for the year:
The all share index is up 10%;
The food and drugs retail index is up 8,5%;
The Top 40 index, which accounts for 87% of total market capitalisation, is up 11,28%;
The resource index is up 21,66%, driven by commodities such as platinum, coal and steel;
The telecoms index is up 10%;
The mid Cap index is up 4,8%;
Small caps are up 9,4%.