Gold basks in JSE spotlight

Johannesburg - Resources shares, and in particular gold shares, were in the spotlight again on Tuesday morning, but this time it was for the right reasons.

At midday the Resources index was 1.53% higher than Friday’s close, with the Gold index gaining a massive 6.19%.

Technical analysts said the picture for these shares has improved, largely as a result of an adjustment in commodity prices and the positive influence of the slightly weaker dollar on commodities and precious metals in general.

These shares were further supported by the news that China devalued its currency to support a stuttering economy. This announcement on Tuesday morning weakened the rand, which means local commodity producers will receive more for their exports in rand.

READ: Rand falls as China devalues currency

The rand fell sharply early on Tuesday, along with fellow emerging market units after China devalued its currency to support a lacklustre economy.

At midday the rand weakened more than 0.5% to R12.73, not far off the previous week's 14-year low of R12.8300.

The market tone was also stronger, with all the major indices higher as local equities play catch-up on global markets which enjoyed an improved start to the week on Monday.

By midday the All-share index was 0.81% stronger at 52 435 points and the Top 40 index gained 0.88% to 46 840 points. The Financial index was also 0.90% higher and the Industrial index gained 0.90%.

The major indices all opened higher and then moved mostly sideways in morning trade. At midday the All-share index was  lower than its opening level of 52 497 points. The Resources index was at one stage more than 2% higher.

Imara SP said the Top 40 index TOPI is likely to edge back ahead of its 65-day moving average and although the resistance at 47 380 points is unlikely to be breached, it does represent a potential near-term target.

The big news of the morning was China's move to boost its economy, as any action to achieve this will be good news for commodities demand.

China devalued the yuan on Tuesday after a run of poor economic data, guiding the currency to its lowest point in almost three years. Data released at the weekend showed that China’s exports tumbled 8.3% in July, hit by weaker demand from three huge trading partners – Europe, the United States and Japan.

The world’s second-largest economy has slowed markedly this year and some economists believe it is expanding at much less than the official 2015 target of 7%. Even if it meets the target, growth will come in at a 25-year low.

Gold and platinum prices improved, which gave share prices a boost. Among Tuesday morning's biggest winners were aluminium producer Hulamin [JSE:HLM], which gained 11.7% to R5.44, Lonmin [JSE:LON], which traded 11.39% stronger at R8.90, and Harmony [JSE:HAR], which was 9.24% stronger at R13.24. ArcelorMittal [JSE:ACL] traded 9.74% higher at R16.90.

Anglo American [JSE:AGL] by midday traded 1.48% up at R158.74, but earlier the share was as high as R163.07.

Naspers [JSE:NPN], the company with the biggest exposure to China through its interest in Chinese internet giant Alibaba, gained 2.18% to R1 785.06.      

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