South African stocks ended the week in the red on Friday after rallying to another all-time record high above 80 000 points mark, buoyed by risk-on global investor sentiment.
The market was boosted by optimism around China’s recovery and hopes for smaller interest rate hikes from the US Federal Reserve, despite ongoing global recession worries and the domestic energy crisis.
The JSE All Share Index powered to 80 226 index points for the first time ever on Friday, with the tech stocks and resource-linked sectors providing the main support.
In intraday trade on Friday Bytes Technology Group rose 2.32% to R85.45 per share while Thungela Resources and DRDGold were 1.5% and 1% higher to R240.84 and R14.30 per share, respectively.
However, shares in fashion retailer Mr Price plunged 6.8% to R165.34, despite reporting the highest third-quarter sales in its history, which were boosted mostly by a recent acquisition of footwear and clothing retailer Studio 88 Group.
Sentio Capital equity analyst Lesedi Mabuza said the JSE had Asian markets to thank as their trade had the most influence on the domestic market.
“Even though you have seen the US markets in the red for the past three days or so, you are seeing China doing really well and keeping on rising. And that is mostly due to the prospects from better economic activity as they let go of the Zero-Covid policy going forward,” Mabuza said.
“And that’s mostly spilling over into our markets as we see in the resource markets and industrial markets, which are doing the most heavy lifting today.”
However, the rand reflected a negative sentiment as it weakened to R17.232 against the US dollar during early trade, holding close to the lowest in over a week, amid heightened concerns over the ongoing power crisis.
Power cuts have worsened during the second week of January as Eskom has implemented its worst-ever continuous outages.
A lot of people are asking themselves, “How can the JSE reach record levels while the country is plunged into darkness through power cuts, leaving businesses struggling and households feeling the pinch?”.
Old Mutual Wealth investment strategist Izak Odendaal said the answer was really that the global sentiment had turned for the better this year and the markets have been on a more optimistic footing.
Odendaal said that had lifted the JSE up, but it had also boosted the rand a bit, although the rand had been weaker in the past day or two.
“The improved global sentiment is because inflation is starting to turn down quite a bit in the main economies, especially in the US, while economic activity still seems to be holding up, in fact holding up better than expected,” Odendaal said.
“So, a lot of the sort of worst case scenarios that people were talking about last year haven’t materialised.
“And remember, when it comes to markets, you don’t need the news to be good. You just need the news to be less bad than you expected. And then you can see markets rally.
“But of course if you return to South Africa, the impact of the load shedding will unfortunately be quite negative for economic growth.”
Eskom on Friday said it would maintain load shedding at Stage 4 and lower it to Stage 3 on Saturday, and further reduce it to Stage 2 on Sunday morning.
President Cyril Ramaphosa convened a special meeting with the President’s Coordinating Council (PCC) on Friday to address the ongoing energy crisis, but there was yet anything forthcoming from the government about solutions.
The ongoing energy crisis has been cited by a few economists as South Africa’s Achilles heel which could single-handedly cripple economic activity this year amid a myriad of challenges forecast to cause a global recession.
A majority of the World Economic Forum’s Community of Chief Economists expect a global recession in 2023, see geopolitical tensions continuing to shape the global economy, and anticipate further monetary tightening in developed economies.
Bank of America’s sub-Saharan Africa economist, Tatonga Rusike, on Friday said the longer blackouts had weakened their outlook for South Africa’s growth from 1.3% to 1% in 2023.
Rusike said South Africa’s 2022 economic performance could be described as M-shaped, with ups in the first and third quarters, and downs in second and fourth quarters.
“Even so, it is likely to have managed 2.4% full year growth. In 2023, the forecast is gloomy with persistent blackouts, the effects of high inflation, and cumulative SARB (SA Reserve Bank) hikes taking their toll on consumption spending,” Rusike said.
“We now estimate real GDP (gross domestic product) growth at 1% in 2023, down from 1.3% in December and 1.5% in November. Potential benefits of China’s reopening are weighed down by global recession risks and domestic weakness.”
BUSINESS REPORT