Picture: MICHAEL ETTERSHANK
Picture: MICHAEL ETTERSHANK

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THE JSE ended the week on a high note on Friday as banks and financials propelled the all share firmer on the possibility of further rate increases this year by the Reserve Bank.

Higher rates increase the annuity income of banks, but over time they could result in higher bad debts. However, bad debt levels of the big four banks have dropped substantially since the 2008 global financial crisis.

The Reserve Bank is expected to hike rates further this year as inflationary pressures pick up on the weaker rand.

The Bank on Thursday increased the repo rate 25 basis points to 7%, despite a downward revision to its economic growth and inflation outlooks.

At 5pm the all share closed 1.19% up at 53,824.30 points and the blue-chip top 40 had added 1.36%. The all share closed above 53,000 for the first time this year on Thursday.

Banks rose 3.56%, financials lifted 2.14%, property rose 1.51% and industrials added 1.49%. The gold index shed 6.55% and resources lost 0.77%.

The all share ended the week 4.03% higher and has gained 6.18% so far this year.

The JSE was also supported by firmer European markets, with the euro gaining on the dollar on the day. In late trade the FTSE 100 was 0.24% up and the Paris CAC 40 had gained 0.37%. The Dax was 0.37% higher, while the Dow Jones industrial average opened 0.52% firmer, pushing it into positive territory for the year.

Momentum Asset Management analyst Sanisha Packirisamy said higher nominal interest rates remained key in an increasingly challenging capital flows environment.

"The monetary policy committee (MPC) acknowledged the slow adjustment in the current account deficit despite a meaningful depreciation in the rand over the past year," she said.

Ms Packirisamy said the Bank also expressed concerns over the extent of net portfolio bond and equity outflows since the January meeting. Since the beginning of the year, nonresidents have been net purchasers of bonds to the value of about R6bn, but net sellers of local equities to the value of about R20bn.

The Bank was likely to remain accommodative for the rest of the year, meaning real interest rates would still be lower than consumer inflation, the MPC said at its Thursday press conference.

"Against this background we expect a further two interest rate increases of 25 basis points each this year," Ms Packirisamy said.

Among individual shares on the JSE, BHP Billiton was up 1.81% to R185.47, while Kumba Iron Ore dropped 8.8% to R79.89 in volatile trade.

Anheuser-Busch InBev rose 3.39% to R1,869.94.

Gold Fields plunged 12.38% to R57 after announcing an accelerated book build to raise R2.5bn on Thursday. Harmony slumped 5.02% to R59.17.

Standard Bank was the star performer amid banking shares, rocketing 5.18% to R131.48. Barclays Bank added 3.59% to R150.

Investec plc shed 0.65% to R110.39. The group announced in a pre-close briefing on the day the depreciation of the rand would hit its results for the year to March 31.

Short-term insurer Santam soared 12.25% to R241.32 and Discovery was up 5.92% to R120.66.

Retailers performed well on the day, with general retailers firming 4.10%. Mr Price jumped 6.73% to R183.58 and Woolies rose 5.58% to R89.

Hyprop gained 2.20% to R121, while Remgro added 3.86% to R259.66.

Coronation Fund Managers jumped 9.25% to R72.02.