Recovery in mining stocks boosts JSE
London (June 2) A FIRM recovery in the mining space mainly driven by the weaker rand provided a solid underpin to gains on South Africa’s equity market on Monday.
The JSE closed up 0.37% to 49‚817.89 points‚ with the blue-chip top 40 index firming 0.47%.
A culmination of negative local data released recently‚ including poor manufacturing output‚ a ballooning deficit on the trade account‚ and a contraction in first-quarter growth, sent the rand to a five-week low of about R10.68 against the dollar on Monday.
Gold‚ platinum and resource stocks experienced a change of fortunes during the day after sharp declines in precious metal prices last week triggered heavy selling in the sector.
"The mining space enjoyed a relief rally today with gains driven by the weaker rand more than anything else‚" said Investec Asset Management head of equity dealing Ryan Wibberley said.
Companies like Anglo American (AGL)‚ Kumba Iron Ore (KIO) and BHP Billiton (BIL) perform well in a weaker rand environment due to their rand hedge qualities. Rand hedge stocks help inflate corporate earnings when revenue denoted in dollars is converted back into rand.
Mining shares also found support on Monday, from upbeat manufacturing data out of China‚ which showed that Chinese factory output activity climbed to a five-month high in May due to an increase in new-sales orders.
China’s official purchasing managers index (PMI) superceded market expectations in May, rising to 50.8 points last month from 50.4 in April.
The boost in Chinese manufacturing activity is expected to provide short-term support for commodity prices‚ and local miners are likely to benefit.
Among individual shares Kumba Iron Ore jumped 4.03% to R336 after closing down more than 5% on Friday.
African Rainbow Minerals lifted 2% to R189.61, Glencore rose 2.1 Weak economic backdrop sees rand fall to five-week low Gold falls for fifth session, hits fresh four-month low China PMI lifts global stocks, commodities Oil climbs after Chinese PMI hits five-month high 6% to R58.65 and Anglo American gained 2% to R265.20.
Sibanye led gains the gold sector, with a 3.02% increase in its share price to R26.99 followed by Harmony’s 2.16% rise to R28.45, while AngloGold Ashanti added 1.64% to R167.60.
Platinum counters saw Impala gain 2.01% to R112.99 and Anglo American Platinum improve 1.45% to R457.56.
