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Dire economy set to eat into company earnings

Johannesburg - Last week’s downward trend on the JSE came to a halt on Monday morning but there are still no indications of a change in fortunes for local investors.

Read: JSE downward trend seems set to continue

Selective bargain hunting help to push most of the major indices marginally higher, but there is still no sign of the abundance on Wall Street and the Asian markets - which are trading at record levels - spilling over to the local market.

Read: Asia up, Wall Street reaches higher

The reality that the South African economy is in dire straits - and that this will have a negative influence on company earnings - is beginning to claim its toll.

By midday the All-share index was only 0.25% higher at 51 085, while the Top 40 index was 0.22% stronger at 45 719.

Among the other indices the Financial index gained 0.24% and the Industrial index was 0.66% stronger with most of the big market capitalisation shares higher, but the Resource index lost another 0.21%.

Resources stocks were influenced by weaker-than-expected purchasing managers' index figures on Chinese manufacturing, which means base metal prices will remain low a bit longer.

On Friday Wall Street closed at another record on the back of strong economic data which moved political uncertainty on the Ukraine crisis to the back burner, but lately Wall Street seems to have very little influence on the local market.

The Asian markets were also higher despite the disappointment about Chinese manufacturing data.

Emerging markets, including the Asian markets with the exception of Japan, are also boosted by the prospect of further economic stimulus in the eurozone, which pushed European bond rates to new record lows. This is normally good for the South African market too, but not this time around.

The one local share that performed well this morning was the Bidvest group [JSE:BVT] which gained more than 2% after its chairperson Brian Joffe announced that the group is considering a listing of its substantial food distribution interests on the London Stock Exchange.

By midday Bidvest traded 2.33% higher at R287.87. These gains were however not enough to make up for last week’s losses and the share price is still 3% lower on the last seven days.

Bidvest also announced an increase of 11% in headline earnings supported by foreign exchange moves. A new listing in London of the group’s food interests will create another rand hedge opportunity for local investors.

Read: Bidvest profit up but lags expectations

Among the major industrial shares Richemont [JSE:CFR] gained 0.82% to R102.12 and SABMiller [JSE:SAB] was 0.46% higher at R586.52. Naspers [JSE:NPN] improved by 0.64% to R1 316.57.

In the resources sector Anglo American [JSE:AGL] was virtually unchanged at R269.19, but BHP Billiton [JSE:BHP] lost 1.16% to R330.62 due to its big exposure to the Chinese economy.

 - Fin24

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