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The JSE in particular is desperately seeking direction. On Friday morning the major indices hardly moved for the second day in a row.
By midday on Friday the All-share index was only 0.16% lower at 51 359 points while the Top 40 index lost only 0.28% to 46 154.
All the other major indices hardly moved, with the exception of the Resource index which dropped 0.67% on continuing concerns about metal prices after disappointing data on China’s manufacturing activity, which could have a negative effect on demand for South African base metals.
Investor confidence has also been shaken by fallout from the African Bank [JSE:ABL] debacle and Shoprite’s [JSE:SHP] disappointing results, which gave a serious warning about the perilous state of the local economy, at a stage when many shares have unrealistically high valuations.
On Thursday evening the S&P 500 index on Wall Street set a new record as US stocks powered higher, shrugging off geopolitical problems elsewhere and gaining from fresh signs of strength in the US economy.
The new high put the broad-based S&P 500 up 7.8% for the year. The Nasdaq reached its best level in 14 years and was 8.5% above where it began the year.
Buyers were not bothered by more signs of weakness in the European and Chinese economies.
And they took encouragement from positive data on the US economy: existing-home sales picked up pace in July; new claims for unemployment insurance were down, and the Conference Board's index of leading economic indicators improved sharply.
Investors elsewhere however did not follow the US lead, with the Asian markets lower and the European markets steady.
China's PMI shock
Investors were shocked by the news that the HSBC/Markit Flash China Manufacturing Purchasing Managers' Index fell to 50.3 in August from July's 18-month high of 51.7, badly missing a Reuters forecast of 51.5.
When the news broke on Thursday, Assore’s [JSE:ASR] share price on the JSE was badly affected and the share dropped to a 52-week low. On Friday morning stocks lost a further 3.29% to another low of R318.28. The share price is now 8.1% down for the month and 16.7% for the past year.
Kumba [JSE:KUM], the other major iron producer, was not affected as badly and lost only 0.43% to R334.22. The share is however already 26% down for the past year and trades at a price to earnings ratio of only 7.56.
Anglo American [JSE:AGL], Kumba’s holding company, was 0.43% down to R334.22 and is now 1.9% down for the last six months. It is still 15.5% higher for the past year.
BHP Billiton [JSE:BHP], which has a big exposure to China, lost 0.89% to R346.15 and has already slipped 3.6% over the past six months. For the year it is still 14% higher.
In the retail sector, Shoprite recovered after losing more than 10% in the last week and moved 1.35% higher to R143.90.
Truworths International [JSE:TRU], which gained more than 8% on Thursday after better than expected results, rose another 5.19% to R74.74.
The big difference in the prospects of the two shares is the fact that Shoprite still trades at a PE ratio of 20 compared to Truworths’ ratio of 12.
Gold Fields [JSE:GFI] gained a solid 1.93% to R45.45 after its headline earnings for the second quarter were three times higher than in the first quarter, due to cost savings.
The company said a claim of R12bn by Randgold Exploration against South Deep, Gold Fields’ flagship mine in South Africa, was without merit.
- Fin24
