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Johannesburg - Share prices on the JSE were slightly higher on Monday morning, but there is still no sign that the market is breaking out of the current band which is heading nowhere.
Technical analysts said the morning’s slight recovery is a reaction to last week’s somewhat overdone selling, but there are no indications that the technical picture for South African shares is improving.
Local shares have been drifting slightly lower for the past three months and although there is no indication of a market rout, there is also no indication that the market is approaching a bottom.
Imara SP Reid said in its daily Market Snapshot on Monday that a good shake-out on high volumes would offer some conviction that a near term trading bottom had been reached.
By midday all the major indices were higher but, as was often the case last week, the indices opened decisively higher and then drifted mostly sideways for the rest of the morning.
Although by midday the All-share and Top 40 indices were still higher than Friday’s close, they were lower than the opening levels.
At that stage the All-share index was 0.51% higher at 51 080 points and the Top 40 index had gained 0.59% to 45 609 points. Last week, when the market was quite volatile after news of the Chinese devaluation, the All-share index lost 3.7% and the Top 40 index 4.06%.
Over 30 days the All-share index is 2.21% lower and the Top 40 index 2.19%, and over the past 90 days the indices respectively lost 3.37% and 2.32%, by no means a major correction but rather an indication of a market seeking direction in uncertain times.
Analysts on Monday morning said investors are still nervous about the Chinese economy and the possible further devaluation of the yuan, although the Chinese currency stabilised towards the end of the week after the Chinese central bank said no more devaluations were necessary.
Some commentators think the yuan can lose as much as 10% against the dollar, with serious implications for exporters to China and for Chinese importers and companies with foreign debt. These concerns led to the Hang Seng index losing 0.7% on Monday morning to 23 814.65, the lowest close since July 8.
The possibility of a hike in US interest rates as early as next month also put pressure on emerging markets like South Africa as investors reassessed holdings of emerging market assets, including those on the JSE.
US Treasuries fell and equities advanced amid factory data that added to evidence that the US economy is strong enough to withstand an increase in the Federal Reserve’s target interest rate. The minutes of the Federal Reserve’s latest open market committee meeting will be released on Wednesday, which will give an important indication of what will happen to US interest rates.
Many of the major shares on the JSE have also been drifting aimlessly over the past week weeks. Naspers [JSE:NPN] gained 0.56% to R1 714.10 and was one of the busiest shares on the JSE. However, the share is now 5.59% lower over the past week and 10.81% over the past 30 days.
MTN [JSE:MTN] is also 5.59% lower over the past seven days and 15.6% softer over the past 30 days, but gained 0.61% on Monday to trade at R198.19.
Richemont [JSE:CFR], which was fairly active recently, lost 7.68% over the past week but is still 1.52% higher over the past 30 days. On Monday it recovered strongly to trade 1.93% firmer at R103.48.
British American Tobacco [JSE:BTI], which recently traded at all-time highs, lost 0.48% on Monday to R739.22. It is now 2.249% softer over the past week but still 10.7% higher over the past 30 days.
The financial sector, which was in the limelight last week after strong results from Standard Bank [JSE:SBK], Nedbank [JSE:NED] and Old Mutual [JSE:OML], gained only 0.28% on Monday.
Standard Bank’s share price, which did not react at all to Friday’s announcement of excellent results, was almost unchanged on Monday at R154.09.
