The JSE closed firmer on Tuesday as banks and retailers rose on a firmer rand, while miners and gold shares showed little momentum on the day.
The rand firmed to R12.4941 to the dollar from R12.6748, before weakening marginally toward the close.
The local market shook off emerging-market (EM) jitters, albeit in low-volume trade. Global sentiment was positive amid indications a trade war between the US and China might be averted, with European markets benefiting from the weaker euro.
The FTSE closed at a record high for the second consecutive session, while the Dow was slightly weaker son after opening. “Recent selling of EM assets created a buying opportunity, particularly for equities,” BlackRock asset managers said in a note.
A wobble across EM assets due to tightening financial conditions and geopolitical tension had tempered enthusiasm for the asset class, it said, “Yet broader fundamentals were robust”.
The recovery on the JSE occurred amid a worldwide rebalancing of assets after the US 10-year treasury yield crossed the important resistance level of 3% last month. Higher bond yields could lead to an outflow from equities and lower markets.
There was no certainty as to what level the US 10-year treasury yield would need to reach to cause a wholesale switch out of equities into bonds, as the 3% was barely positive in real terms, said Old Mutual Multi-Managers strategist Dave Mohr.
What is clear, is that the era of ultra-loose money is ending, Mohr said. Equity returns will have to be driven by earnings growth, “and on that score, the picture is still healthy”.
The all share closed 0.52% higher at 58,121.80 points and the top 40 added 0.56%. Banks rose 1.85%, property 1.43%, food and drug retailers 1.31%, financials 1.23%, and general retailers 1.14%. The gold index dropped 0.8% and resources 0.43%.
BHP lost 1.18% to R299.71. British American Tobacco dropped 1.22% to R636.91.
Standard Bank gained 2.27% to R205.06, FirstRand 2.14% to R61.61, and Capitec 1.35% to R856.03.
Murray & Roberts lifted 0.50% to R16.03, but Aveng plummeted 23.75% to 61c. Aveng has to issue more shares to finance the take-over offer from Murray & Roberts, which will dilute present shareholder value.
Growthpoint added 1.97% to R27.41 and Redefine 1.86% to R11.49.
Rhodes Food was 2.33% lower at R17.60. It earlier said headline earnings per share (HEPS) for the six months to end-April dropped 39% to 31.4c due to the dilution caused by the issue of shares to pay for the acquisition of Pakco.
Naspers added 0.47% to R3,195.
The top 40 Alsi futures index gained 0.53% to 51,921 points. The number of contracts traded was 18,502 from Monday’s 16,666.