New record trades on the JSE announced last week

Last week was an interesting one for the JSE. The exchange usually trades around R23 billion on a normal day, but last week hit a record R64 billion in trade. This was mainly due to two big transactions. SABMiller and INBev, contributing to one fifth of the day’s total trades with R12.6 billion worth of transactions. The second was GlaxoSmithKline that contributed 26.9% of the day’s total trades, with R17.3 billion changing hands.

 

Warnings regarding political unrest and a possible downgrade

Credit rating agency Standard and Poor’s has announced that political unrest in South Africa could affect their decision about the country’s credit rating. This announcement yet again led to the rand weakening against the dollar, which indirectly also had an effect on the JSE. Consumers are still hopeful that South Africa will not face a downgrade from this ratings agency on 2 December.

 

Possible interest rate hikes by the Federal Reserve Bank

There have been rumours about Janet Yellen and the US Federal Reserve possibly increasing interest rates later this year. However, we still believe that US interest rates will remain unchanged until early next year, as originally announced. Should the US rates be hiked, the decision will result in more pressure on the rand and consumers.

 

Market update

On 5 October 2015, the rand traded at R13.58 against the dollar, compared to the current R13.62.

Over the last year, the rand has seen many ups and downs and currently, the currency is undervalued by about 6% according to analysts. This means that it should theoretically be trading at R12.80 against the dollar.

 

 

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Average growth of the JSE All Share Index

Last year at this time, the JSE All Share Index traded at 52 726 compared to this morning’s 51 659. From January to today, the index grew by 3% in value. This is detrimental to investors who need to draw an income from pension funds and living annuities of 2.5% – 17%. 3% growth will not be enough to generate a sustainable income, nor to beat inflation.

 

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Email us with your questions

If you have market-related questions you would like us to address, please send your questions to groot@ecsponent.com and we will answer these in our next interview.