Publications
Partners
Johannesburg - Gold shares on the JSE recovered strongly on Monday morning, but analysts said that does not mean the downward trend in stock prices is over.
A sharp rise in the Gold index could not pull the rest of the market higher and by midday the All-share index was 0.12% lower at 51 294, while the Top 40 index traded 0.23% softer at 45 751.
By midday the Gold index was 5.30% higher than Friday’s close, with some of the top gold shares as much as 8% higher, but that can only be described as a technical correction from an incredibly oversold position.
The gold price, which is currently the lowest in more than five years, did not show any sign of improvement.
The Gold index's intraday graph turned down again and moved slowly down for the rest of the morning.
Harmony [JSE:HAR] was the biggest mover on the gold board and traded 8.71% higher at R12.98 by midday, while AngloGold Ashanti [JSE:ANG] gained 6.66% to R83.41. The share at one stage reached as high as R84.90, but from that point moved gradually down the rest of the morning.
Sibanye [JSE:SGL], which forecast a sharp drop in earnings, was 4.22% higher at R17.53 and Gold Fields [JSE:GFI] jumped 4.92% to R36.25.
The resources sector, which is also oversold, made a technical correction and gained 2.12%, but the Financial and Industrial indices continued to drift slowly lower.
By midday the Financial index had lost 0.24% and the Industrial index was 0.64% lower, after Naspers [JSE:NPN] dropped more than 2% in reaction to Monday's rout on the Chinese markets.
READ: China stocks plunge, suffer biggest one-day loss
Imara SP Reid said in its daily Market Snapshot that commodities and commodity shares are incredibly oversold, but it is unlikely that the downward trend will be reversed as commodities (including gold) are still under pressure from higher anticipated yields in the US.
The future movement of US interest rates is again in the spotlight this week, as the Federal Reserve starts a new policy meeting on Tuesday which might give a clearer indication of when US interest rates will be raised for the first time.
In the resources sector BHP Billiton [JSE:BIL] gained 2.11% to R223.08, but Anglo American [JSE:AGL] was only 0.18% higher at R153.94.
By midday Glencore [JSE:GLN] was only 3c or 0.07% higher than its 52-week low of R41.07 to trade at R41.10. African Rainbow Minerals [JSE:ARI] also recovered from a 52-week low of R68.55 to trade 1.05% higher at R68.97.
The JSE showed very little reaction to news that the Chinese market in Shangai on Monday suffered its biggest one-day decline in more than eight years, plummeting 8.48% in defiance of government efforts to prop up the market.
READ: Shanghai stocks see worst fall since 2007
Hong Kong's benchmark Hang Seng index fell 3.09% to 24 351.96 on turnover of HK$116.25bn.
The one share that did react was Naspers, which is closely linked to the Chinese economy through its interest of 34% in Chinese internet giant Tencent, which is listed on the Hong Kong stock exchange.
Most of Naspers’ income and value is linked to Tencent and any concern about the Chinese economy will have a detrimental influence on the company’s value.
The fall in China came as weak economic data caused sentiment to turn, despite official efforts to support the stock market following a rout that began last month.
READ: China's engineered stock rally comes unhinged
On Monday the Chinese government said that profits of major industrial firms slipped 0.3% year-on-year in June to 588.57 billion yuan.
Continued concern about the Chinese economy will have a further detrimental effect on resources shares, as China is the most important buyer of South African commodities.
* Fin24 is part of Media24, a subsidiary of Naspers.
