MARKET WRAP: JSE and rand enter 2020 on a high note

The JSE ended 2019 in far better shape than it entered it, while the rand also made some gains for the year.

Emerging markets have been battered in 2019 as the nearly two-year-old trade war between the US and China has had a damaging effect on global GDP growth.

The rand has been buffeted by a number of international and local factors, including Brexit, the US-China trade war, and problems at local state-owned entities (SOEs) such as Eskom and SAA.

Many of these issues are still to find resolution, with Britain still in danger of leaving the EU without a trade deal, while, although promised by both sides, the US and China are yet to put pen to paper on the first phase of an apparently agreed trade deal.

Eskom remains the biggest danger to SA’s fiscus, with debt in excess of R450bn, while SAA can see some light at the end of its very dark tunnel, having been put into business rescue recently.

The rand reached its best level in more than five months on Monday, before pulling back a bit overnight. It recovered again, however, on Tuesday and at 12.30pm was 0.51% firmer at R14.0439/$. This brings its gains against the dollar to about 2.15% in 2019. At the same time, it had strengthened 0.39% to R15.7506/€ and 0.15% to R18.4759/£, with gains for the year now amounting to 4.32% against the euro, its best performance since 2016. It is, however, down 0.92% to the pound.

Despite closing lower on Tuesday, the JSE has had a far better year than 2018, entering the new decade with gains of 8.24% in 2019 — this after a fall of 11.37% previously. It rose 17.47% in 2017, lost 0.08% in 2016, and eked out a marginal gain of 1.85% in 2015. Its average gains for the past 20 years now stand at 11.41% per year. If the past five years are excluded, which were somewhat disappointing, the average gain rises to 14.12%.

This drop in average growth on the local bourse reflects disappointing local GDP numbers caused by a number of factors, including Jacob Zuma’s presidency, high rates of unemployment and a fall in foreign direct investment.

The R2030 government bond has also strengthened during 2019, having entered the year on a yield of 9.385% and ending it at 8.980%, reflecting a slight drop in the government’s borrowing costs. Bond yields move inversely to their prices.

[email protected]
[email protected]