JOHANNESBURG - SOUTH African stocks ended the day on a positive note ahead of the release of the gross domestic product data for the fourth quarter of 2020.
The JSE All Share Index closed trading 0.23 percent higher to 68 426 index points as global investors digested progress towards a long-awaited US Covid relief package. The US Senate passed President Joe Biden’s $1.9 trillion (R29.15trln) Covid-19 relief plan on Saturday, which would be one of the largest stimulus packages in US history.
Local stocks had been on a rise and produced a fourth consecutive positive monthly return having rallied 26 percent since the start of November 2020.
Old Mutual Investment strategist Izaak Odendaal said the market benefited from the recent surge in commodity prices, with the JSE’s resources index more than doubling from the March 2020 low.
“The bottom line is that, generally speaking, commodity prices have received a big boost from strong post-lockdown global growth and restricted supply,” Odendaal said. “The local economy and the JSE are benefiting from the upswing in commodity prices, but the day will come when prices turn again.”
The rand, however, remained muted and eased 0.11 percent to R15.45 against the dollar as the highly volatile domestic currency was sold off in the face of severe market risk-off.
ActivTrades senior analyst Ricardo Evangelista said the approval of the US rescue plan suggested the recovery will be faster than previously expected.
“The prospect of a sudden rise in inflation is scaring investors into selling bonds and causing yields to rise, making it more expensive to hold short dollar positions,” Evangelista said.
The US dollar gained ground in relation to its peers as investors reacted to fears that inflation will follow the post-pandemic rebound in economic activity.
Investec chief economist Annabel Bishop said investors were dumping higher risk emerging markets portfolio assets in general.
Bishop said that the rand remained at risk of further weakness this month and in the next few, particularly if Fitch moves to downgrade South Africa.
“We continue to believe that the domestic currency will average weaker in the second quarter of 2021, around R15.40/$, with high risks to the downside,” Bishop said.
“That is, the rand could see markedly greater weakness than this, with the rating agencies looking for progress on fiscal consolidation.”
BUSINESS REPORT