The JSE closed at a record high on Thursday as banks and rand hedge shares drove the market higher in response to positive Chinese PMI data and the decision by the Reserve Bank to keep rates unchanged.
The all share reached an intraday high of 50 037.05 points in early morning trade after the Chinese manufacturing PMI posted a robust rise to 49.7 points, from 48.1 in April, thereby indicating further signs of a recovery in the Chinese economy.
The all share is at now at a price to earnings ratio of 19.3, higher than the post-1994 average of 14.5, raising concerns that a correction could be imminent. Some analysts, however, have cautioned that the higher valuations have been supported by strong recent company earnings, many of which have been above their long-term averages.
The market fell later after PMI data from the eurozone painted a more subdued picture of European growth. The Reserve Bank’s decision to keep rates unchanged was as expected, but the downgrading of 2014 gross domestic product growth to just 2.1% from 2.7% earlier damped sentiment slightly.
The all share index closed up 0.49% at 49 891.36, thereby surpassing its previous high recorded on May 15. The blue-chip top 40 index gained 0.47%. Banks were the star performers, with the index up 0.93%.
The market was also driven by rand hedge shares among industrials, with the index up 0.62% for the day, just behind platinums, which gained 0.64%. Financials rose 0.44% and resources firmed 0.26%. Gold was down 0.23%.
Global markets were flat with the Dow Jones industrial average up 0.10% and the UK FTSE 100 rising 0.04% by 5pm local time.
IG South Africa market analyst Shaun Murison said the all share was in overbought territory. “The price to earnings is nearing 20 times which is a significant premium to its historical mean.”
He said this served as a possible warning of a correction, but precedence should be given to the underlying trend which was undoubtedly bullish. “Locking in profit is perhaps the safer approach rather than betting against the market for those uneasy at these levels.”
But a bullish momentum had a habit of remaining intact a lot longer than expected, Murison said.
The tone of the day was set by early morning annual result releases from brewing giant SABMiller (SAB) and Investec (INP). The SABMiller adjusted earnings growth of 2% was judged to be pedestrian by some analysts, but the share ended the day 2.64% higher at R586.92, a new record.
Investec plc (INP) posted a strong 28% profit rise in rands, but ended the day 1.57% lower at R88.59. It has, however, risen 29% over the past six months.
Among resources BHP Billiton (BIL) was 0.71% firmer at R337.87.
Standard Bank (SBK) led the rise among banking shares, closing 1.32% higher at R143.88. Rival FirstRand (FSR) rose 1.02% to R39.80.
Among platinum shares Northam Platinum (NHM) was 3.70% stronger at R45.64. Impala Platinum (IMP) was up 0.68% to R114.99 on prospects of a possible settlement of the four-month strike in the sector this week.
Retailer Spar (SPP) closed 1.82% up at R128.47 after reporting solid interim results on Wednesday.
Naspers (NPN) was down 0.93% to R1208.60.
Telkom (TKG) dropped 1.76% to R37.50. It earlier announced an ambitious bid of R2.6bn to take over listed information and communication technology company Business Connexion (BCX), which generates in excess of R6bn per year in revenue. Business Connexion rose 7.38% to R6.40.
Food and consumer goods conglomerate Tiger Brands (TBS) closed 3.10% up at R308.49 after reporting fair interim results on Wednesday.
Taste Holdings (TAS) was down 4.41% at R3.80.