Johannesburg at year-end is a ghost town, its stillness inversely matched by the cacophony of blasts and bangs on New Year’s Eve.
It’s the same with the stock exchange. Even before the Christmas break, when brokers and dealers had already packed for Plett, the JSE was trading at record levels.
The streets of Jo’burg remain quiet after New Year, but the stock market continues its ride ballistically into the stratosphere.
Where breaking the 23 000 level not too many months ago seemed a lofty ideal, the all-share index began the new year by cracking 25 000.
The JSE began last year with the all-share index at 18 000, recording a 37% increase by year-end. Put in money terms, this is a 40% increase from R3,5-trillion to just more than R5trillion.
While foreigners bought R284-billion of JSE-listed equities in 2005, these purchases jumped to R480-billion last year.
On a net basis allowing for sales, non-residents bought R73-billion compared with R50-billion the previous year.
If it appears that the JSE has gone bonkers, it is not alone. Worldwide markets have started the new year by recording record highs, which, despite a weaker dollar, reflects concerns surrounding the economic health of the United States, the world’s largest economy.
The world today is rightly seen as a precarious place, prey to terror and unforeseen natural calamities such as Hurricane Katrina. These uncertainties manifest themselves in unpredictable and volatile prices, most notably the oil price, which traded at stratospheric levels during the past year but is now back to a more palatable $60 a barrel.
The world economy has taken the unpredictability in its stride, notching up relatively high levels of growth. This has been clearest in emerging economies, especially in China and India, but other blocs, such as the European Union, have also shown relatively impressive growth.
Analysts are forecasting easier oil prices in the coming year. Helen Henton, head of commodity research at Standard Chartered Bank, says: “We expect the market tightness to ease during 2007, bringing oil prices lower overall, but further prices spikes cannot be ruled out, given ongoing geopolitical tensions.”
Using the Dubai spot price as the basis for forecast, Standard Chartered Bank is expecting an average price per barrel of $52 in 2007, down from an average of $61 a barrel last year.
The rand started the year as it finished, at below R7 to the dollar, R6,88 to be precise, pushed in part by a higher gold price.
The 2006 inflation figures surprised observers, as both producer and consumer inflation were lower than expected. The figures eased pressure for further rate increases by Reserve Bank Governor Tito Mboweni.
Investor confidence in the JSE comes despite a slew of negative local news, including rising crime, HIV/Aids and capacity constraints ranging from insufficient skills to a shortage of cement.
Investors have also shrugged off a high current-account deficit — R10-billion in November — as the country continues to consume more than it produces.
The country’s foreign account remains positive, however, as foreign investment flows have been keeping the overall picture positive.
The boom on the JSE follows growth in GDP of 5% in 2005 and expected growth of 4,5% last year. The government, in the form of the Treasury, is projecting a quieter year for the economy this year, predicting GDP growth to come in at 4,3%.