Johannesburg - Share prices on the JSE traded higher on Wednesday, but contrary to expectations the impetus for the market did not come from US President Donald Trump’s speech before Congress on Tuesday night.
Instead, resources shares jumped sharply on a series of surveys in China, Japan and other countries showing a promising uptick in manufacturing activity in the region. Manufacturing activity in Japan expanded at the fastest tempo in three years.
Asia, China and Japan in particular are important buyers of South African commodities, and an increase in economic activity not only means higher sales but also higher prices.
The softer rand, which on Wednesday morning traded at R13.11 to the dollar, also helped dual-listed shares which were under pressure when the local unit traded at below R13.00/$.
The rand dropped back with other emerging market currencies after a strong run by the dollar on expectations of an interest rate hike in the US next month. Several Federal Reserve officials said in speeches that Trump’s economic policies have strengthened the case for an interest rate hike soon.
By mid-morning the Resources index was already 1.95% higher, with the Industrial index also 0.38% stronger and the Financial index 0.23% higher.
The result was that the All-share index at mid-morning was 0.57% stronger at 51 436 points, while the Top 40 index gained 0.67% to 44 424 points.
Trump’s speech before a joint sitting of the US congress was a huge disappointment for the markets as he did not offer further details on his plans for infrastructure spending and tax reforms.
Trump promised to improve the immigration system, jobs and wages for Americans and pledged "massive" tax relief to the middle class and tax cuts for companies, but offered few clues on how this would be achieved.
US markets were therefore choppy and directionless but in Asia, Chinese stocks advanced 0.4% after the stronger-than-expected factory readings. Japan's Nikkei jumped 1.1%, buoyed by a weaker yen and strong manufacturing data.
South32 [JSE:S32], the international commodity group which was unbundled from BHP Billiton at the beginning of 2016, was the top performer and traded 5.21% higher at R25.85. The share has lately been under pressure with the rest of the commodity sector and lost 14% over the previous 30 days.
Exxaro [JSE:EXX], the empowerment company with interests in coal and iron ore, traded 4.25% stronger at R112.85. Exxaro’s share price gained more than 12% over the past month, in contrast with the rest of the resources sector.
BHP Billiton [JSE:BIL], the biggest loser among the big commodity shares over the last month, at mid-morning was already 3.59% stronger at R216.44. The share shed 13% of its value over the previous 30 days. Anglo American [JSE:AGL], which lost more than 7% over that period, was 3.23% higher at R210.19. Glencore [JSE:GLN], which has been relatively stable over the past month, gained 3.15% to trade at R53.77.
Naspers [JSE:NPN], the international media group which also benefits from a strong Chinese economy through its interest of 34% in the Chinese internet giant Tencent, traded 1.12% stronger at R2 108.98. Richemont [JSE:CFR] was 1.54% higher at R97.00. Steinhoff [JSE:SNH] however lost 0.07% to R69.78.
Barclays Africa [JSE:BGA] and FirstRand [JSE:FSR] were the busiest shares in the banking sector, with Barclays Africa gaining 0.91% to R153.34 but FirstRand 0.04% softer at R49.70.