Publications
Partners
Johannesburg - Share prices on the JSE did not react much to the poor growth figures announced on Tuesday morning.
The All-share index, which closed just above the 50 000-level last night, traded in a close band of about 100 points, and did try twice to break through 50 000 again, but without success.
It also did not drop further on the back of the news that the economy contracted for the first time on a quarterly basis since the recession in 2009.
After lunch, the All-share index was only 0.19% lower on 49 927.82 and the Top 40–index
On an unadjusted year-on-year basis, the economy grew by 1.6% in the first quarter compared with 2% in the fourth quarter.
This was much poorer than than the quarterly contraction of 0.1% predicted by a panel of economist polled by Reuters. The economist also saw year-on-year growth of 1.9%.
The fact that share prices did not fall sharply in reaction to the disappointing growth figures could mean that the news has already been discounted, or is a confirmation of what a lot of people are saying about the JSE, that the major indices are no longer a reflection of what is happening in the economy.
The JSE is currently trading just below all time record levels at a time when the economic prospects for the country are worsening by the month. Only last week the South African Reserve Bank adjusted its forecast for economic growth for 2014 from 2.6% to 2.1% which could still be too optimistic.
The main reason for the decrease in economic activity were the mining and quarrying industry (-1.3 percentage points) and the manufacturing industry (-0.7 of a percentage point), stated Stats SA.
The sharp drop in mining activity is a result of the strike in the platinum mines near Rustenburg.
But the lack of economic activity could be a timely reminder to investors that the current valuations are too high. The fact that the All-share index is treading water just below the 50 000-level indicates that investors are thinking twice before pushing prices higher.
Some the shares that did well in early trade are no so reliant on the South African economy.
Richemont [JSE:CFR], the international manufacturer and retailer in luxury goods traded at a new record, up 0.66% at R109.57, beating its previous high of R109.37 set in February.
SABMiller [JSE:SAB] also crept upwards and by 14:00 it was 0.4% better on R582.12. The share hit a record of R586.24 before profit-takers stepped in.
Naspers [JSE:NPN] was however 0.48% down to R1 194,75.
Some of the banks, which are closer linked to the South African economy, did lose some ground. Standard Bank [JSE:SBK], which reached a new record of R145 last week, gave up 1.04% to R142.01, while stalwart, FirstRand [JSE:FSR] lost 1.92% to R39.42.
The All-share index, which closed just above the 50 000-level last night, traded in a close band of about 100 points, and did try twice to break through 50 000 again, but without success.
It also did not drop further on the back of the news that the economy contracted for the first time on a quarterly basis since the recession in 2009.
After lunch, the All-share index was only 0.19% lower on 49 927.82 and the Top 40–index
0.16% lower on 44 932.45.
All the major indices were marginally lower with the Gold index (-1.52%) and the Financial index (-0.64%) the worst performers.
Stats SA announced that South Africa's GDP contracted 0.6% quarter-on-quarter in the first three months of this year. The economy had expanded 3.8% in the fourth quarter of 2013. All the major indices were marginally lower with the Gold index (-1.52%) and the Financial index (-0.64%) the worst performers.
On an unadjusted year-on-year basis, the economy grew by 1.6% in the first quarter compared with 2% in the fourth quarter.
This was much poorer than than the quarterly contraction of 0.1% predicted by a panel of economist polled by Reuters. The economist also saw year-on-year growth of 1.9%.
The fact that share prices did not fall sharply in reaction to the disappointing growth figures could mean that the news has already been discounted, or is a confirmation of what a lot of people are saying about the JSE, that the major indices are no longer a reflection of what is happening in the economy.
The JSE is currently trading just below all time record levels at a time when the economic prospects for the country are worsening by the month. Only last week the South African Reserve Bank adjusted its forecast for economic growth for 2014 from 2.6% to 2.1% which could still be too optimistic.
The main reason for the decrease in economic activity were the mining and quarrying industry (-1.3 percentage points) and the manufacturing industry (-0.7 of a percentage point), stated Stats SA.
The sharp drop in mining activity is a result of the strike in the platinum mines near Rustenburg.
But the lack of economic activity could be a timely reminder to investors that the current valuations are too high. The fact that the All-share index is treading water just below the 50 000-level indicates that investors are thinking twice before pushing prices higher.
Some the shares that did well in early trade are no so reliant on the South African economy.
Richemont [JSE:CFR], the international manufacturer and retailer in luxury goods traded at a new record, up 0.66% at R109.57, beating its previous high of R109.37 set in February.
SABMiller [JSE:SAB] also crept upwards and by 14:00 it was 0.4% better on R582.12. The share hit a record of R586.24 before profit-takers stepped in.
Naspers [JSE:NPN] was however 0.48% down to R1 194,75.
Some of the banks, which are closer linked to the South African economy, did lose some ground. Standard Bank [JSE:SBK], which reached a new record of R145 last week, gave up 1.04% to R142.01, while stalwart, FirstRand [JSE:FSR] lost 1.92% to R39.42.
