SA stocks, mining firms bounce on stimulus measures

South African stocks rebounded sharply on Tuesday, along with global markets, on new stimulus from the U.S. Federal Reserve and resource firms soared on higher palladium and platinum prices following the announcement of a 21-day lockdown.

President Cyril Ramaphosa said on Monday South Africa, a major producer of the metals, would be in lockdown from Thursday to try to curb the spread of the coronavirus.

Mining companies bracing for a heavy hit from the nationwide lockdown warned of an expected leap in costs in addition to their lost output.

Analysts believe the lockdown could provide significant support to Platinum Group Metals.

Palladium rose as much as 15%, on track for its biggest daily gain since 2001, and platinum gained 8.09% at 1637 GMT. Gold also rose.

Prices also rose on the new round of stimulus measures. The Fed announced unlimited quantitative easing and programmes to support credit markets on Monday to try to backstop an economy reeling from emergency restrictions on commerce to fight the coronavirus.

“With them moving directly into the corporate debt market, it means that big corporations will be able to raise even cheaper funding. That cheaper funding can then be used to have the required cash flow to get through the next few months,” Asset Management firm Vestact said in a note.

The mining index jumped 14.41%, with Sibanye-Stillwater and Impala Platinum leading the gainers.

The lockdown is likely to have big consequences for an economy that had already tipped into recession in the final quarter of last year, but the measures were widely praised as the decisive, tough action needed to contain the outbreak.

The JSE’s Top-40 index closed 8.23% firmer at 37,550 points, and the broader all-share index climbed 7.53% to 41,149 points.

The banking sector rose 9.05%, and retailers climbed 5.11%.

In the currency market, South Africa‘s rand rose against a weaker dollar, also boosted by the promise of unlimited dollar funding from the Fed, which helped risk sentiment globally.

At 1705 GMT, the rand ZAR=D3 traded at 17.4720 per dollar, 2.12% stronger than its previous close.

Bonds took a tumble, with the yield on the 10-year instrument due in 2030 gaining 5 basis points to 12.355%.