Johannesburg - The rand rally, which started on Tuesday, continued on Wednesday morning, also pulling the JSE higher.
The rand, which was the worst hit in last week’s sell-off of emerging market currencies, is now the strongest performer among its peers. By midday the currency was 1.38% stronger at R16.44 to the dollar.
Financial shares benefited the most from the stronger rand; by midday the Financial index had already gained 1.75% and the Industrial index was 0.73% up. The All-share index traded 0.67% higher at 48 719 points and the Top 40 index was 0.75% stronger at 43 817 points.
The rand recovery was the result of strong indications that China is stepping up efforts to prevent a sharp depreciation of its currency. The reference rate of the yuan was stable on Wednesday for the fourth consecutive day.
Fears that China was trying to devaluate its currency to make the economy more competitive led to a huge sell-off of Chinese shares last week and caused a rout on world markets, as a softer yuan increases foreign investment risk in China.
There was also good news about the Chinese economy which supported emerging market currencies, particularly the rand, as their economies depend on a strong China to buy the commodities they produce.
Data on Wednesday showed Chinese exports unexpectedly increased in December, while imports fell less than forecast.
The better-than-expected news about the Chinese economy also helped the resources sector recover after a weak opening. It was more than 1% down shortly after the market opened, but by midday it was only 0.31% lower. Gold lost 1.21% at that stage.
BHP Billiton [JSE:BIL] set yet another 52-week low when the share price dropped 0.54% to trade below R150 per share at R149.24. It is now almost half the 52-week high of R296.00 reached in May last year. Anglo American [JSE:AGL] was 1.15% lower at R56.69.
South Africa’s two biggest iron producers, Kumba Iron Ore [JSE:KIO] and Assore [JSE:ASR], also traded at new 52-week lows. Kumba was 4.27% softer on a new low of only R28.00, compared to a high of R236.98 in February last year. Assore was 1.69% weaker on a low of R56.29.
FirstRand [JSE:FSR] gained 4.6% on Wednesday to trade at R40.94. Barclays Africa Group [JSE:BGA] was 3.15% higher at R132.04 and Standard Bank [JSE:SBK] traded 3.07% stronger at R104.10.
Sanlam [JSE:SLM], which gained more than 4% on Tuesday, increased 2.74% to R55.55 and Old Mutual [JSE:OML] 1.59% to R38.95.
British American Tobacco [JSE:BTI] reached a 52-week high for the second day and at midday traded 0.30% higher at R882.68.
The retail sector, which performed strongly on Tuesday after better-than-expected results from some retailers, continued its momentum on Wednesday.
Shoprite Holdings [JSE:SHP], which was 3.2% stronger on Tuesday, gained another 3.6% to R136.76 on Wednesday. Although the group said first-half revenue growth slowed to 8.8% from 13% a year earlier, it was probably still better than expected. Sales at supermarkets in South Africa rose by 7.2%, while sales in the rest of Africa were were 15% up.
Cashbuild [JSE:CSB] traded 1.52% higher at R295.00 in reaction to revenue growth of 15% in the second quarter. Sales growth was buoyed by the retailer’s store roll-outs.
Foschini [JSE:TFG] was 2.13% higher at R121.93. The group recently produced strong sales growth of 33.6% for the six months to end-September 2015, boosted by the acquisition of UK international women’s clothing brand Phase Eight. Local sales were 10.8% higher.