South African stocks hit 14 month record high
BHP Billiton Plc, Anglo American Plc and SABMiller Plc led the FTSE/JSE Africa All Share Index up 1,146.54, or 4.3 percent, to 27,661.61, the biggest advance since March 19, 2009. The measure lost 7.4 per cent last week.
Emerging-market stocks gained after the worst weekly drop in more than a year as the 16-member European Union agreed to offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators. The European Central Bank will also purchase government and private debt in certain markets, European Union Economic and Monetary Commissioner Olli Rehn said in Brussels.
Copper for July delivery rose the most in six weeks in New York, gaining 2.9 per cent to $3.2345 a pound. Platinum, aluminum, lead, nickel and zinc also rallied. Oil soared as much as 4.5 per cent to $78.51 a barrel, the biggest intraday increase since September 30.
“This rally is not surprising — we’d seen such panic- selling last week with even the good-quality stocks getting hit,” Ferdi Heyneke, an equity trader at Afrifocus Securities Ltd., said by phone from Johannesburg. “We may still see some volatility in the days ahead, even after the European governments came together over the weekend with this big aid package.”
Anglo American, the diversified mining company that makes up more than 10 per cent of South Africa’s benchmark stock index, surged the most in 10 months, climbing 7.4 per cent to 304.68 rand. BHP Billiton, the world’s largest mining company, advanced 5.6 percent to 222.32 rand. SABMiller, the world’s second- biggest brewer, increased 4.9 per cent to 219.01 rand.
Meanwhile, South African bond yields dropped the most in 17 months and the rand had its biggest rally in a year after European leaders unveiled a loan package to contain the region’s sovereign debt crisis.
The 13.5 per cent security due September 2015 rose 96 cents to 123.08 rand, reducing the yield on the bond by 20 basis points to 8.08 per cent, the largest decline since December 17, 2008. The rand gained as much as three per cent to 7.4268 per dollar, the biggest intraday surge since May 4, 2009, before trading 2.3 per cent up at 7.4815 by 4:22 p.m. from a previous close of 7.6597.
Emerging-market stocks climbed the most in almost 10 months while currencies rallied after European Union finance ministers agreed to an aid package to counter a selloff of assets of countries in the region with large fiscal deficits, including Spain and Portugal. The emergency fund allows the EU to purchase government and private debt to prevent speculators from driving up the cost of borrowing.
“The European rescue package is the dominating factor in the market at the moment, and it’s causing a total turnaround in risk appetite after last week’s selloff,” said Richard de Roos, head of foreign-exchange trading at Standard Bank Group Ltd. in Johannesburg. “Investors are putting risk back on at the moment and that’s resulting in a stronger rand” as well as “a rebound in equities and other emerging-market asset classes.”
The rand appreciated versus all but two of its 16 most- actively traded currencies monitored by Bloomberg, strengthening 1.6 percent against the euro to 9.6069.
Concern that the Greek financial crisis will spread wiped $3.7 trillion from the value of global stock markets last week as investors dumped high-yield assts on concern Europe’s fiscal woes would undermine the global economic recovery. Employment in the U.S. rose in April by the most in four years, suggesting a recovery in the world’s biggest economy is becoming self- sustaining.
South Africa’s currency rallied even after labor unions and businesses issued a joint statement in Johannesburg today saying it was “overvalued” and that the central bank should cut its benchmark interest rate to weaken the currency. The rand should be pegged at 9 rand to the dollar, Stewart Jennings, the chief executive officer of PG Group Ltd., said at the meeting.
Sasol Ltd., the world’s biggest maker of motor fuel from coal, and ArcelorMittal South Africa Ltd., a unit of the world’s largest steelmaker, also signed the statement, which was distributed to reporters in Johannesburg today. Other signatories included Hulamin Ltd., Consol Glass Ltd., Allied Electronics Ltd. and Bell Equipment Ltd.