Stocks pick up, but rand falters as oil prices rise to 3-year high

SOUTH African stocks recovered yesterday after China posted an impressive 8.1 percent economic growth for 2021, but the rand faltered as oil prices rose to a 3-year high.

The Chinese economy grew 8.1 percent in 2021, the fastest expansion in nearly a decade, exceeding the government's target of above 6 percent and following a revised 2.2 percent growth in 2020.

The JSE All Share Index yesterday rose as much as 0.5 percent, to above 75 600 points by 3pm, lifted by oil giant Sasol, which was buoyed by the rally in global oil prices. The index closed at 75 593.47 points yesterday.

Sasol rose more than 0.5 percent to R291.48 per share in the afternoon trade, before closing at R290.25 on the JSE yesterday.

The JSE’s recovery came at the back of closing in the red on Friday, after the All Share index slumped 1 percent as comments from the US Federal Reserve regarding an interest rate hike in March weighed on investor sentiment.

However, it was not surprising as the domestic stock market has risen from around 63 700 points to above 75 600 points in exactly one year, as more economies are reopening and supply-chain disruptions are subsiding.

Anchor Capital co-chief investment officer Nolan Wapenaar said the JSE still had a potential to grow even further – growth that could be led by telecommunications companies.

“Global macro factors are playing an increasingly important role for portfolio construction on the JSE,” he said. “On our numbers, we forecast a total return of 12 percent for the JSE in 2022 and we continue to see reasonable value across the market, with telcos the one sector in which we remain largely underweight following its recent outperformance.”

Meanwhile, the rand traded lower yesterday, after ending last week on the front foot when it benefited from a weaker dollar and increased risk appetite. By 5pm yesterday, the rand was bid at R15.41 against the greenback, weighed by elevated oil prices, which could also impact fuel prices in oil-importing South Africa.

Brent crude futures traded around $86 (R1 320) per barrel yesterday, probing a three-year high of $86.72 hit in October 2021, as the bull run in oil prices showed no signs of slowing down.

Oil prices continued to trend higher amid concerns over tightness in the oil market, with investors shrugging off a potential hit to fuel demand from the omicron variant. The moves also came even after China agreed to release crude oil from its national strategic stockpiles around the Lunar New Year holidays, that start on February 1, as part of a plan to reduce global crude prices.

Investec chief economist Annabel Bishop said the rand continued to display typical January strengthening patterns, but was likely to attempt R15.20/$1 this month.