JSE Top 40 Jumps 1.3% as Gold Hits Records and Rand Eyes 16.70
South African equities kicked off the week on a firmer footing, with the JSE's benchmark indices boosted by surging commodity prices...
Quick overview
- South African equities are experiencing a rally, driven by rising commodity prices and a strengthening rand.
- The JSE's Top 40 Index rose approximately 1.3%, supported by record highs in gold and platinum prices.
- The rand has gained over 12% year-to-date, improving sentiment towards local assets despite ongoing economic challenges.
- Analysts warn that recent market gains are largely influenced by favorable global conditions rather than domestic economic improvements.
South African equities kicked off the week on a firmer footing, with the JSE’s benchmark indices boosted by surging commodity prices & a rand that’s gaining ground. Investor attention has shifted towards exporters and resource-heavy stocks, as precious metals remain the market leaders.
Commodities and Currency Drive the Rally
The Johannesburg Stock Exchange has really benefited from a mighty external wind in its sails. Gold prices have hit fresh record highs, while platinum has reached its highest level in over 17 years, lifting mining shares and companies that rely heavily on exports. These gains have helped the broader FTSE All Share Index push up higher, while the Top 40 Index rose by about 1.3% – this reflects the strong support from heavyweight stocks.
At the same time, the South African rand has continued to outperform, extending its year-to-date gains to over 12%. According to TreasuryONE’s head of market risk, Wichard Cilliers, the combination of strong inflows from exporters & the elevated metal prices means the rand could be on track to test its 16.70 level against the dollar again. A stronger currency has helped take some pressure off imported inflation and improve sentiment towards local assets.
Key market drivers are:
- The Top 40 Index was up roughly 1.3%
- Gold has hit record highs
- Platinum is at a 17-year high
- The rand is up more than 12% so far this year
Rand Strength Lifts Equity Confidence
The rand’s stability is a major reason the equity market has been so resilient lately. As the rand strengthens, the outlook for exporters improves & foreign investors find local assets much more attractive from a risk perspective. All this has helped drive both liquidity & valuations higher – even though the domestic economy still has plenty of challenges.
Of course, analysts are cautioning that much of the recent gains are due to favorable global conditions rather than any structural shift in the domestic growth story.
Growth Still Lags Structural Needs
South Africa’s economy is still growing at a pace that’s not good enough to make a real dent in unemployment. While the third-quarter GDP showed an improvement, long-term growth is still hampered by infrastructure bottlenecks, energy reliability issues & cautious business investment.
Over the past six years, GDP growth has lagged population growth, which just goes to show that the gap between short-term market gains & long-term economic progress is still significant. Unless the economy starts to grow at a rate closer to 3 or 4%, equity rallies may struggle to spread beyond commodity-linked sectors.
JSE Top 40 Technical Outlook
From a technical point of view, the JSE Top 40 Index is still looking positive, trading near 108,180 within a rising channel on the 2-hour chart. Price is still making higher highs & higher lows, supported by the 50-EMA near 106,736 & the 100-EMA around 105,972. A level that used to be resistance at 107,430 is now acting as support, while upside targets are roughly at 108,735 & the top of the channel around 110,700. The RSI is elevated at 71, a sign of strong momentum, but we also need to see clear reversal signals.
Only as long as the index stays above 107,000 is the technical bias going to stay on the upside.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save