MARKET WRAP: JSE ends up as rand fades after budget speech

After a positive initial reaction, both the JSE and the rand gave back gains after finance minister Tito Mboweni’s budget speech, as investors reflected on the reality of the country’s dire economic situation.

While Mboweni spoke, the rand strengthened as much as 0.9% to its best intraday level since January 2020 at R14.3919/$. Most analyst comment was also positive as many believe the budget showed an improved outlook for SA’s battered public finances.

The rand dipped back to levels above R14.50/$, however, within a few minutes of the speech as Mboweni noted that the state of the deficit remains dire, with the cost of debt also growing rapidly, which is a risk factor.

At 6.20pm, the rand had weakened 0.16% to R14.5526/$, while it was fairly flat at R17.6559/€ and R20.5082/£. The euro fell 0.17% to $1.2131.

The rand is still up 1.2% to the dollar so far in 2021.

“Bearing in mind that the economy was already in a recession when the pandemic hit SA a year ago, there is much economic ground to recover. While the budget rightly emphasised that there will be an economic rebound this year, the drivers of SA’s growth prospects beyond 2021 are much more important,” said North-West University Business School professor Raymond Parsons.

“The economy is not yet out of the woods and much of the expected economic rebound is predicated off a very low base. Stronger, immediate, domestic economic trends therefore need to be translated into sustainable, job-rich investment and growth over the medium term,” he said.

The JSE all share firmed, while its global counterparts were mixed as a rise in US treasury yields put pressure on some risk assets, with most tech stocks falling. Naspers was not spared as the tech-heavy Nasdaq lost 0.92%, falling for a third day, down 0.83% to R3,565.33.

The all share closed 0.42% firmer at 66.200.76 points, with the top 40 rising by a similar margin. Banks added 1.26%, resources 0.89% and financials 0.88%. The gold mining index fell 1.75%, while industrials were little changed.

At 6.30pm, the Dow Jones industrial average was 0.65% firmer at 31,742.79 points. In Europe, the FTSE 100 added 0.52%, France’s CAC 40 0.39% and Germany’s DAX 30 0.88%. 

Earlier, the Shanghai Composite fell 1.99%, Hong Kong’s Hang Seng 2.99% and Japan’s Nikkei 225 1.61%. 

Gold was 0.41% lower at $1,797.83/oz while platinum added 2.14% to $1,263.62. Brent crude rose 2.8% to $66.88 a barrel.

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