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Johannesburg - Bargain hunters came to the rescue on the JSE on Tuesday morning, with most of the indices recovering substantially higher after the previous day's sharp drop.
According to technical analysts, this does not mean that selling pressure has totally disappeared as market sentiment worldwide is still negative.
According to Imara SP Reid's daily Market Snapshot, the local market is also exceptionally oversold. This presents opportunities for bargain hunters which came to the fore on Tuesday morning. The top indices will - at least in the short term - see some technical support.
By midday the All-share index was 2.2% higher at 48 679 points and the Top 40-index gained 2.43%. On Monday the All-share index lost 2.85%, making it 6.28% lower than seven days ago and 9.23% than 30 days ago.
The Financial index was also 2.09% higher while the Industrial index traded 2.44% stronger. The Resources index gained 2.29% after strong gains by BHP Billiton [JSE:BIL], which gained more than 3% despite a sharp drop in earnings.
The Gold index was however the victim of profit-taking after gaining more than 34% over the past seven days. The index traded 6.97% lower, with most major gold shares sharply down.
Imara SP Reid said JSE losses were actually less substantial than those of many emerging markets. The Hang Seng index in Hong Kong, which also recovered somewhat on Tuesday, is officially in a bear market after already losing more than 25%.
The JSE could be aided by the weak rand, which means exporters will receive more in rand for their exports. This helps to soften the blow of lower commodity prices, which continue to decline on perceptions that China's growth rate will be much lower than originally expected.
The rand also recovered somewhat on Tuesday morning and at midday traded at R13.17 to the dollar after the South African Reserve Bank indicated that it might intervene in the currency market to curb volatility.
READ: Sarb may step in to stem rand's fall
Concern about the Chinese economy, and its influence on world growth, continued to hamper markets on Tuesday morning. Although European markets were also higher, Japan's Nikkei index lost almost 4% and the Chinese market was again 6% down before stabilising. On Monday Chinese shares lost more than 8% of their value.
Wall Street is also expected to recover on Tuesday afternoon after the Dow Jones-index lost 3.58% on Monday. More than 14 billion shares were sold on Monday, the highest volume since August 10 2011.
Monday’s exceptionally high volumes are suggestive of a very short-term washout, which indicates a high probability of very short-term technical improvement
Naspers [JSE:NPN] was one the JSE's strong performers on Tuesday and gained 4.78% to R1 688.33 at midday. The share price is heavily exposed to the Chinese economy through its 34% interest in the Chinese internet giant Tencent, which is listed on the Hong Kong Stock Exchange.
Before Tuesday morning’s recovery, Naspers was 5.74% lower over the past seven days and 14.08% over the past 30 days.
MTN [JSE:MTN], which lost more than 7% on Monday, traded 4.2% higher at R174.78. Sasol [JSE:SOL], which lost 9.74% over the past seven days, gained 3.74% on Tuesday after the price of Brent crude recovered to trade above $43 a barrel. British American Tobacco [JSE:BTI] was 0.84% stronger at R389.27.
In the financial sector, FirstRand [JSE:FSR] was 3.38% higher at R51.62 and Sanlam [JSE:SLM] gained 3.11% to R61.35. The share lost 8.22% over the previous seven days.
BHP Billiton's results, announced on Tuesday morning, clearly illustrated the difficulty of trading conditions in commodity markets. The operating profit from ongoing operations for the full year dropped from $22.6bn to $8.67bn, and headline earnings per share from 2 575c to only 128.7c.
The company did however increase its dividend by 2% to 124c out of strong cash flow, which impressed the market. The share price at midday was 3.56% higher at R212.09. South32 [JSE:S32], the company which was unbundled from BHP Billiton, traded 9.81% higher at R14.44 after it lost 17% over the previous seven days. Anglo American [JSE:AGL] gained 2.24% to R142.11.
Mr Price [JSE:MPC] was the busiest share on the JSE in terms of value and gained 2.95% to R232.46.
