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Port Elizabeth - Investors can expect a volatile week in which there will be little new news to give direction to the market.
Sanlam [JSE:SLM] and British American Tobacco [JSE:BAT] will announce some quarterly figures and Naamsa will announce how new motor vehicle sales are doing.
This is an important indicator that shows consumers’ ability to spend, as well as their confidence with regards to the affordability of those looming hire purchase payments.
The week that was
The JSE looked a bit tired towards the end of the week, after hitting record highs week after week for the last few months.
That is not to say the run is over. Maybe buyers are just slowing down to grab a quick drink from the water point before speeding up again.
Commentators have, however, been warning that shares are on demanding valuations and news this last week were convincingly negative.
Firstly, there was the announcement that SA’s economy has shrunk by 0.6% in the first quarter of 2014 and expectations are that the second quarter will not be better.
The Producer Price Index (PPI) showed an even larger increase in production prices in April than during the previous few months.
Eventually the 8.8% increase in producer prices will flow through to consumer prices, already increasing by more than 6% compared to a year ago.
At the same time private demand for credit is even slower.
SA Reserve Bank (Sarb) figures released last week show that private sector credit extension grew by just more than 8% compared to previous growth of closer to 9%.
The negative news weighed on the JSE, together with the knowledge of high share prices.
Mining shares
Mining shares led the declines during the week. The decline of 4.4% in the share price of diversified mining giant Anglo American [JSE:AGL] during last week served as a good summary of sentiment in the market.
Largest declines were seen amongst gold mines, courtesy of a static gold price and a strengthening rand.
Harmony [JSE:HAR] fell nearly 11% compared to a week ago and DRD Gold [JSE:DRD] declined by 10%. AngloGold Ashanti [JSE:ANG] ended the week 5.5% lower.
Platinum shares did not fare much better. AngloPlats [JSE:AMS] fell 5%, Implats [JSE:IMP] declined 4% and Northam [JSE:NHM] ended the week nearly 7% lower.
The outlook for platinum shares is worsening, with even the most optimistic investors having to admit that the disruptive strike is bound to have long term effects.
Most economists have already indicated that the strike is having a huge effect on the whole of SA's economy.
Other mining and resource shares were also mostly lower, such as Kumba Iron Ore [JSE:KIO] which fell 9%.
Elvraz Highveld Steel [JSE:EHS] declined another 11% last week as investors keep on bailing out of the shares following reports that the company’s long term survival is once again at stake.
Mining contractor Protech [JSE:PKH] seems to be in deeper trouble than expected and the share dropped a massive 40% last week.
Industrial shares
The negative sentiment flowed over to other market sectors. Industrial shares, as well as banking counters, declined quite a bit.
Among industrials, Barloworld [JSE:BAW] fell 4%, Reunert [JSE:RLO] shed 2% and Nampak [JSE:NPK] dropped by 3%.
Adcock Ingram [JSE:AIP] fell by nearly 8% after new owners Bidvest [JSE:BVT] indicated that recovery at the troubled pharmaceutical company might take a few years, rather than a few months.
Banking shares
Banking shares were all feeling the brunt of the change in market sentiment.
African Bank [JSE:ABL] declined again after a brief spurt the previous week.
This was following the announcement by ratings agency Moody’s that it downgraded its rating on Abil’s local and international debt instruments to below investment grade.
The shares are back around the R8.50 level, where most banking analysts peg the share at the moment. It took a quick 9% decline last week to get here again.
The Abil preference share dropped another 6% and now offers a very high yield of more than 13%.
Nedbank [JSE:NED], Standard Bank [JSE:SBK] and Barclays Africa [JSE:BGA] declined by a few percent each, after figures last week raised doubt about SA’s economic growth, the high indebtedness of consumers and – in contrast with weak growth - the very real possibility of an increase in interest rates next time the SA Reserve Bank's monetary policy committee members assemble.
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at NMMU.
Sanlam [JSE:SLM] and British American Tobacco [JSE:BAT] will announce some quarterly figures and Naamsa will announce how new motor vehicle sales are doing.
This is an important indicator that shows consumers’ ability to spend, as well as their confidence with regards to the affordability of those looming hire purchase payments.
The week that was
The JSE looked a bit tired towards the end of the week, after hitting record highs week after week for the last few months.
That is not to say the run is over. Maybe buyers are just slowing down to grab a quick drink from the water point before speeding up again.
Commentators have, however, been warning that shares are on demanding valuations and news this last week were convincingly negative.
Firstly, there was the announcement that SA’s economy has shrunk by 0.6% in the first quarter of 2014 and expectations are that the second quarter will not be better.
The Producer Price Index (PPI) showed an even larger increase in production prices in April than during the previous few months.
Eventually the 8.8% increase in producer prices will flow through to consumer prices, already increasing by more than 6% compared to a year ago.
At the same time private demand for credit is even slower.
SA Reserve Bank (Sarb) figures released last week show that private sector credit extension grew by just more than 8% compared to previous growth of closer to 9%.
The negative news weighed on the JSE, together with the knowledge of high share prices.
Mining shares
Mining shares led the declines during the week. The decline of 4.4% in the share price of diversified mining giant Anglo American [JSE:AGL] during last week served as a good summary of sentiment in the market.
Largest declines were seen amongst gold mines, courtesy of a static gold price and a strengthening rand.
Harmony [JSE:HAR] fell nearly 11% compared to a week ago and DRD Gold [JSE:DRD] declined by 10%. AngloGold Ashanti [JSE:ANG] ended the week 5.5% lower.
Platinum shares did not fare much better. AngloPlats [JSE:AMS] fell 5%, Implats [JSE:IMP] declined 4% and Northam [JSE:NHM] ended the week nearly 7% lower.
The outlook for platinum shares is worsening, with even the most optimistic investors having to admit that the disruptive strike is bound to have long term effects.
Most economists have already indicated that the strike is having a huge effect on the whole of SA's economy.
Other mining and resource shares were also mostly lower, such as Kumba Iron Ore [JSE:KIO] which fell 9%.
Elvraz Highveld Steel [JSE:EHS] declined another 11% last week as investors keep on bailing out of the shares following reports that the company’s long term survival is once again at stake.
Mining contractor Protech [JSE:PKH] seems to be in deeper trouble than expected and the share dropped a massive 40% last week.
Industrial shares
The negative sentiment flowed over to other market sectors. Industrial shares, as well as banking counters, declined quite a bit.
Among industrials, Barloworld [JSE:BAW] fell 4%, Reunert [JSE:RLO] shed 2% and Nampak [JSE:NPK] dropped by 3%.
Adcock Ingram [JSE:AIP] fell by nearly 8% after new owners Bidvest [JSE:BVT] indicated that recovery at the troubled pharmaceutical company might take a few years, rather than a few months.
Banking shares
Banking shares were all feeling the brunt of the change in market sentiment.
African Bank [JSE:ABL] declined again after a brief spurt the previous week.
This was following the announcement by ratings agency Moody’s that it downgraded its rating on Abil’s local and international debt instruments to below investment grade.
The shares are back around the R8.50 level, where most banking analysts peg the share at the moment. It took a quick 9% decline last week to get here again.
The Abil preference share dropped another 6% and now offers a very high yield of more than 13%.
Nedbank [JSE:NED], Standard Bank [JSE:SBK] and Barclays Africa [JSE:BGA] declined by a few percent each, after figures last week raised doubt about SA’s economic growth, the high indebtedness of consumers and – in contrast with weak growth - the very real possibility of an increase in interest rates next time the SA Reserve Bank's monetary policy committee members assemble.
*After chasing money on the JSE for 15 years, Adriaan Kruger is now living a relaxed lifestyle in Wilderness and lectures economics part-time at NMMU.
