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Johannesburg - Share prices recovered somewhat on the JSE on Tuesday, after the All-share index gave up half of last year’s gains on Monday.
Increased speculation that the European Central Bank (ECB) is planning further measures to boost the embattled eurozone’s economy somewhat eased the pressure after concerns about a new eurozone crisis caused by Greece led to a worldwide sell-off on Monday.
The rand also stabilised for a while after the euro reached new lows on expectations of even lower interest rates in Europe.
Financial shares in particular benefited from expectations of greater stability in Europe, and the big double-listed industrial shares, which were the hardest hit on Monday by concerns about Europe, recovered the most on Tuesday.
The All-share index, which lost 3.4% on Monday compared to growth of 7.8% in the whole of 2014, was 0.87% stronger at 48 241 was by midday on Tuesday. The index rose sharply shortly after the opening, but started to lose momentum towards midday.
The Top 40 index, which includes all the heavyweights hammered on Monday, was 0.91% stronger at 42 347. It was, however, still below the important resistance level of 43 600, which came into play once again after Monday’s sharp drop.
The Financial index was the best performer and traded 1.89% higher and the Industrial index was 1.05% stronger.
Although the Gold index increased by 6.67% on the back of a higher gold price - supported by increased buying of gold for the Chinese New Year - the Resources index was only 0.19% stronger.
The uncertainty about the upcoming Greek election, which could be won by the party wanting to remove Greece from the eurozone, is far from over. It seems, however, as if the market is already concentrating on what will happen after Greece has left.
Even more stimulus in Europe will be good for emerging markets such as South Africa, as it will force investors to look for higher yields in emerging markets. South Africa is, however, currently not a favourite of these investors.
A report by Bank of America Merrill Lynch places South Africa at a low 43 out of 56 emerging markets in terms of real gross domestic product (GDP) growth for the year. The bank forecasts the local economy will grow by 2.3% in 2015.
The forecast for inflation is an average 4.9% for the year and the expected current account deficit as a percentage of GDP will be 4% (ranking 44 out of 56).
Even more significant is the fact that South Africa is ranked last in the top ten emerging markets due to “low ratings across growth, inflation, fiscal, current account and reserves”.
According to the report, South Africa’s low foreign exchange debt remains the “main positive”.
Nedbank [JSE:NED] and Standard Bank [JSE:SBK] were the stars among the financial shares on Tuesday morning, with Nedbank gaining 3.85% to R244.60 and Standard Bank improving by 3.63% to R140.17. FirstRand [JSE:FSR] gained 2.35% to R48.54 and Barclays Africa rose 2.81% to R178.63.
In the industrial sector SABMiller [JSE:SAB], which fell by 4.2% on Monday (the biggest drop since August 2011) lost another 0.93% by midday on Tuesday to trade at R568.98. Earlier in the day the share reached a high of R580.40, about 1% higher than the previous day’s close. Richemont [JSE:CFR] traded 1.2% higher at R100.87 after losing 4.8% on Monday.
In the resources sector BHP Billiton [JSE:BIL] reached a new low on Tuesday when it lost another 0.64% to R232.77. The share lost 5.6% on Monday to reach the lowest level in more than four years, and Tuesday morning was the fifth consecutive day the share price dropped.
Sasol [JSE:SOL] was another 2.01% lower at R396.89 after losing 6% on Monday. The share is now heading towards its 52-week low of R392.78 set in December, when the sharp drop in the oil price started.
Sasol and BHP Billiton are both severely impacted by the lower oil price, with the price of Brent crude dropping to $51.48 per barrel on Tuesday.
