Johannesburg - The main indices on the JSE were virtually unchanged by midday on Wednesday, thanks to a strong performance by financial shares.
By midday on Wednesday the Financial index was 0.965% higher as investors used the oversold position of these shares to pick up bargains.
Resources shares were also 0.70% higher as the All-share index recovered almost all losses from morning’s trade, after opening sharply lower.
The All-share index opened almost 1% weaker at 49 594 points, but by midday most of these losses had been made up and the index was only 0.21% lower at 49 891 points. The Top 40-index, which is now trading below its 200-day moving day average, was only 0.03% lower at 44 365 points.
Trading has however been very volatile over the last few days, with a reasonably steady showing in the morning typically deteriorating sharply in the afternoon.
The All-share index's opening level of 49 594 points was only 76 points (0.15%) higher than the 49 519 points it had reached at the beginning of the year, which means that the year's gains so far have almost been wiped out.
As recently as April 23 the All-share was at an all-time high of 55 188 points, about 10% higher than current levels.
The sharp drop in the market is mainly due to foreign investors fleeing from emerging markets, including South Africa, as they are regarded as too risky in the light of the Greek debt crisis and China's rout which continued on Wednesday morning.
World markets were also generally lower, with the sharpest drops in Asia as the financial world awaits the next development in the Greek debt saga.
The Greek government has to submit detailed reform plans by Thursday. All 28 European Union leaders will then examine the plans on Sunday in a make-or-break summit.
European Commission president Jean-Claude Juncker warned the EU has a detailed Greek exit scenario prepared if Greece fails to reach a deal, although he insisted he wants the country to stay in the eurozone.
Concern is also growing about the continuing meltdown in the Chinese and Hong Kong markets, despite Chinese authorities' initiatives to stabilise the region's markets. The Hang Seng index traded more than 1 000 points lower, giving up 4.20%, while the Shanghai Composite index is once again in the red with a loss of 145 points, just shy of 4%.
China is an important market for South African commodities and concerns about the Chinese economy is not good for commodity prices and shares. Gold traded as low as $1 155 per ounce on Wednesday morning, with platinum just above the $1 000 level at $1 021/oz. Brent crude oil traded 1.2% lower at $56.90.
Naspers [JSE:NPN] is the South African share that is affected most by the sharp drop in Chinese share prices. The company owns 34% of Chinese internet giant Tencent, which is listed on the Hong Kong market and represents most of Naspers’ income and valuation.
By midday on Wednesday Naspers was another 3.63% lower at R1 702.40 after dropping 4.71% on Tuesday. Tencent traded 6.84% lower on Wednesday.
Naspers was the big reason why the Industrial index dropped another 0.63%, as it represents about 12% of the index's value. It is now approaching its 200-day moving average, which is an important resistance level.
The share prices of the top four South African banks were all substantially higher. FirstRand [JSE:FSR] was one of the busiest shares in terms of volume and value, and the stock gained 2.38% to R51.70. Nedbank [JSE:NED] also gained 2.76% to R242.28 and Standard Bank [JSE:SBK] traded 2.46% stronger at R156.22.
Barclays Africa Group [JSE:BGA] was at one stage more than 2% down and traded as low as R175.85 in response to the news that its holding company, Barclays plc, fired its CEO Antony Jenkins after a fall-out with the board of directors. The board said there were major differences about the speed of the group’s cost cutting programme and the size of the merchant bank.
The share price later recovered in line with the rest of the sector and at midday traded 0.86% higher at R180.39.