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Port Elizabeth - The increase in share prices at the end of last week brought a welcome relief to month's of steady losses and most investors would have enjoyed the best weekend in a long time.
However, the jury is still deliberating to decide whether the sharp rally was a dead cat bounce or indeed a signal that the good times are here again.
Some increases in share prices were quite remarkable: Barclays Africa [JSE:BGA] increased by more than 9% during the last week, while FirstRand [JSE:FSR] and Nedbank added nearly 9%. Capitec Bank [JSE:CPI] increased by 13.4% and the share has recovered most of the losses caused by the change in sentiment towards small banks after the African Bank debacle.
Huge market capitalisation shares Naspers [JSE:NPN], British American Tobacco SA [JSE:BTI], Richemont [JSE:CFR], Remgro [JSE:REM] and SABMiller [JSE:SAB] drove the JSE Top 40 higher as international markets all recovered towards the end of the week. Naspers increased by 9%, Remgro by 7.3% and BAT by more than 5%.
International markets were higher thanks to yet another central banker promising to keep on buying back government bonds to inject money into the vulnerable global economy. This week the Bank of Japan followed in the footsteps of the European Central Bank to reaffirm its intentions to continue with stimulating monetary policy.
Uncertainty seemed to be waning with oil prices declining and the gold price falling to its lowest levels in months – breaching the psychological support level of $1 200 per ounce. It sent SA gold shares tumbling. AngloGold Ashanti [JSE:ANG] fell 10.6%, Harmony Gold [JSE:HAR] fell 10.4% and Gold Fields [JSE:GFI] ended the week 9% lower.
Other mining shares followed suit with ArcellorMittal SA [JSE:ACL] falling nearly 6% and Anglo American Platinum [JSE:AMS] dropping nearly 4%.
Bad news from the Reserve Bank of lower economic growth, the recent increase in interest rates and sluggish growth in demand for new credit were largely ignored by investors looking at retail shares. The Reserve Bank announced this week that credit extension to the private sector is still slowing, increasing by only 8.74% in September compared to 8.78% in August. The rate of growth has decreased since January as consumers cut spending.
Statistics SA had only bad news on the labour front. Its latest quarterly employment survey showed that some 5.1 million people of working age in SA are looking for work and cannot find any.
Retail shares, nevertheless, increased sharply. Lewis [JSE:LEW] advanced by 13% on news that it is looking to acquire some of the businesses in Abil’s troubled Ellerines subsidiary. Clicks Stores [JSE:CLS] increased by nearly 14% after its very positive trading update a week ago. Mr Price [JSE:MPC] added 6.6% during the week after management announced that headline earnings per share is set to increase by some 24% in the half year to September.
Other significant price movements included an increase of 8.5% in the share price of Aspen Pharmaceuticals [JSE:APN] after news that the company entered into negotiations to acquire a big share in a New Zealand manufacturer of infant foods.
The week ahead
Several gold mining companies will announce quarterly results during the week, with AngloGold Ashanti and Harmony the two biggest.
ArcellorMittal will also publish a quarterly update, as well as Sappi [JSE:SAP], Old Mutual [JSE:OML] and SABMiller. Mediclinic [JSE:MDC] and Richemont will both publish interim results for the six months to end-September.
The announcement by the National Association of Automobile Manufacturers of new car sales in October will give an indication of consumers’ ability and willingness to commit spending on high-ticket items and their confidence of their own financial outlook over the next year or two.
- Fin24
*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.
