JSE looks set to lift as China’s Covid-19 stance boosts markets, Tencent

The JSE is facing mostly green screens from Asia on Monday where the easing of Covid-19 restrictions in China lifted markets and Tencent, which influences the JSE via Naspers and Prosus.

The Hang Seng in Hong Kong and the Shanghai composite in mainland China rose 2.92% and 0.75%, respectively. The Nikkei in Japan dipped 0.79%. Year to date, the Hang Seng is down 23.39%, the Shanghai composite 14.37% and the Nikkei 4.30%.

Tencent leapt 3.33%, but remains down 41.21% in 2022.

Most markets rallied at the end of last week due to lower-than-expected inflation data from the US lifting hopes that the US Federal Reserve will reconsider its aggressive hiking of interest rates to fight inflation.

“Investors have been waiting for the turn in US inflation for several months now, only to have been disappointed by a relentless string of upside surprises,” Bank of New Zealand senior interest rates strategist Nick Smyth said in a note.

The easing of China’s strict zero-Covid-19 policy lifted market sentiment in Hong Kong and mainland China, with reports that Chinese regulators have approached financial institutions to ask that they give extra support to stressed property developers. This comes despite China recently reporting some of its highest daily Covid-19 cases.

“The latest easing in quarantine requirements is certainly a step in the right direction, but the market is likely to need to see further easing if this recent enthusiasm is to be sustained,” ING Group head of commodities strategy Warren Patterson and commodities strategist Ewa Manthey said in a note.

“Analysts don’t expect any wholesale changes to the zero-Covid-19 policy until after winter, but markets see enough straws in the wind to speculate China could be lining up a pivot to living with Covid-19 from March/April 2023,” Smyth said.

Markets will also monitor the meeting between US President Joe Biden and China’s President Xi Jinping on the sidelines of the G20 Summit in Bali.

Investors in Japan remained wary after Fed governor Christopher Waller warned that it still has a way to go before ending interest rate hikes.

In local markets, the JSE rose on Friday on prospects of cooling inflation in the US, and China easing its zero-Covid-19 policy. The all share rose 3.21% to 72,982 points and the top 40 3.69%. Industrial metals jumped 6.32%, industrials 4.59%, resources 4.05% and precious metals 1.4%.

In the US, the Nasdaq gained 1.88%, the S&P 500 0.92%, while the Dow Jones was flat. The Nasdaq has lost 28.48% of its value in 2022, the S&P 500 16.75% and the Dow Jones 7.76%.

The rand depreciated 0.11% against the dollar, trading at R17.30. The rand has lost 8.52% against the greenback this year.

Commodity prices were mixed as Brent crude advanced 0.42% to $96.22 a barrel, while gold retreated 0.68% to $1,759.10/oz and platinum 0.52% to $1,020.10.

In corporate news, telecom giant Vodacom and construction materials group Sephaku Holdings (SepHold) will publish their interim results while the financial technology company Purple Group will release its annual results.

No economic data is expected.

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