The JSE raced 2.54% higher to trade above 76,000 points once again as investors ran for cover, seeking safety in bonds, the dollar and commodities after President Vladimir Putin ordered Russia’s nuclear deterrence forces to be on high alert and the West imposed even heavier sanctions on Moscow.
This was in contrast to world stocks which dropped as the escalating standoff in Eastern Europe sent shockwaves through markets around the globe. Bloomberg reports about 85% of the companies in the S&P 500 fell and while Russia halted trading of stocks in Moscow, London-listed shares of Russian companies cratered, with depositary receipts for Sberbank of Russia sinking as much as 77%, and energy giant Gazprom dropping 62%, before paring the loss.
In the currency markets, the rand touched R15.50 but traded just below this level for most of the day and was last trading 1.94% weaker at R15.45 against the US dollar.
“As the world turns its attention to the conflict in Ukraine, we have seen emerging market (EM) currencies coming under pressure as the Russian ruble, at one stage, lost nearly 40% of its value against the US dollar. The sharp drop in the ruble has had a little bit of a contagion effect on the rand and other EMs,” comments TreasuryONE.
The Bank of Russia more than doubled its key interest rate to 20%, the highest in almost two decades to stem the rout in the ruble and shield the economy from the impact of sweeping Western sanctions that include penalties on the regulator itself. Concerns are growing that a decision to freeze the Russian central bank’s assets and exclude some of the nation’s biggest lenders from critical international payment systems may increase stress in global funding markets, reports Bloomberg.
On the commodities front, risk sentiment went to “risk-off”, and “we’ve seen markets going into safe-haven assets like gold and the US dollar”, says TreasuryONE. Gold is trading at $1,915, up nearly 2% on the day. The biggest gainer for the day is palladium which is currently trading at $2,511, up over 6% on the day. Platinum is trading at $1,057. Brent Crude was trading as high as $105 a barrel at one stage but has since retreated to $100.82.
JSE-listed mining stocks were the biggest beneficiaries from the rally in commodities, with Harmony surging 14.62% despite posting a 69% plunge in net profit for the six months to end-December and declaring a dividend of 40c compared to 110c in the previous comparative period.
Other huge gainers were Angloplat (+11.73%), Sibanye-Stillwater (+11.73%), Anglogold (+9.87%), Northam (+9.49%), Gold Fields (+9.00%), Thungela Resources (+7.67%), African Rainbow Minerals (+7.12%), Implats (+6.95%) and South32 (+5.73%).
Adding support were heavyweight tech and rand-hedges counters, with Naspers and Prosus gaining 2.32% and 2.08% respectively, while Sasol surged 4.11% and Anglo American added 5.34%.
On the downside, Mondi (-9.64%) felt the brunt of the Ukraine crisis on its business, as it owns the largest Russian paper producer, Mondi Syktyvkar, and earns around 12% of its revenue from that country.
Steinhoff slipped 7.63% and RCL Foods, which posted a 22% increase in headline earnings per share to 72.7c, 4.17%.
“Headlines from Russia drive the EM market, and we can expect the volatility to continue as headlines come through the wires. There is currently an emergency meeting between Ukrainian and Russian officials, and the outcome of the meeting could introduce further volatility. Expect a rough few days for the rand and EM currencies,” cautions TreasuryONE.
