JSE Top 40 Holds 108,000 as Rand Rallies 12% and Gold Lifts Miners
The South African JSE Top 40 Index is currently trading at around 108,400 - not far off it's recent highs. The rand is doing its part...
Quick overview
- The South African JSE Top 40 Index is trading around 108,400, supported by a strong rand at 16.6650 to the US dollar.
- Gold and platinum prices are rising, boosting mining stocks and helping maintain the overall index's resilience.
- Despite a widening budget deficit of 14.99 billion rand, equity investors remain optimistic as long as the rand and commodity prices stay strong.
- Technically, the index shows positive signs, with potential for a bounce back to 109,400 if it remains above 108,000.
The South African JSE Top 40 Index is currently trading at around 108,400 – not far off it’s recent highs. The rand is doing its part to prop up the market, holding strong at around 16.6650 to the US dollar. That’s a pretty impressive 12% gain so far this year, the best we’ve seen since 2009. So far, so good, in terms of inflation control, government finances, and precious metal prices.
Rand at 16.66 Still a Driving Force Behind Equity Support
A strong rand – at 16.6650 – is continuing to drive the market higher, mainly on better-than-expected inflation control, some decent progress on the fiscal front so far this year, and, of course, firm precious metal prices. The US dollar has had a rough time, down around 9% this year so far, mainly due to expectations of US interest rate cuts and growing concerns about the country’s budget deficit.
All of this has made South African assets attractive to offshore investors, particularly those keen on the country’s big-cap stocks, especially those with international revenue streams.
Gold and Platinum Prices Lift Mining Stocks
It’s not just the rand that’s helping support the market – gold and platinum prices have also been on the rise, which has been a real boost for some of the country’s biggest mining stocks. A weaker dollar tends to push up the price of precious metals, so this trend has been a welcome one for investors in mining stocks on the JSE. As a result, gains in these shares have offset some of the losses elsewhere in the market, keeping the overall index fairly resilient despite some mixed signals from around the world.
Budget Deficit Widens to 14.99bn Rand
But, of course, not everything is sunshine and rainbows. The budget deficit has just come in at 14.99 billion rand in November, a sharp increase on the 4.46 billion rand it was last year. This is naturally raising concerns about borrowing needs & interest costs, especially for sectors like banks and state-linked companies that are sensitive to this.
Still, equity investors are willing to look past these short-term fiscal worries as long as the rand stays strong and commodity prices keep rising.
JSE Top 40 Technical Outlook – Near 108,000
From a purely technical perspective, the index is looking fairly positive at the moment. On the 2-hour chart, the price is still stuck inside a rising channel, with a good run of higher highs and higher lows since November.
The recent pullback from 110,300-110,400 stalled out around 108,300-108,400, roughly in line with the 50-period EMA. Candlesticks suggest hesitation rather than real distribution – and the RSI did take a dip towards the low-40s before turning back up again.
As long as the index stays above 108,000, a bounce back up to 109,400 and a retest of 110,300 is still very much on the cards. If we see a sustained break below 107,150, though, that would be the first sign that the momentum is shifting.
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