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Johannesburg - The question foremost in investors’ minds this week will be whether the uptick in share prices towards the end of last week signals the beginning of a recovery. Most shares – with the exception of gold mining stocks – gained enough on late Thursday and Friday to erase last week’s losses.
Shares do indeed offer better value than they did a few weeks ago. The price to earnings ratio (PE) on the JSE Top 40 declined from close to 20 times to below 14 times, with several of the large favourite shares sitting on ratios of around 10 times.
During the last couple of weeks, Sasol’s [JSE:SOL] share price dropped faster than the oil price to push its PE to below 9 times.
Bank shares dropped back from heady ratings to just below their historic rating, where investors were quick to snap up shares such as FirstRand [JSE:FSR] and Standard Bank [JSE:SBK]. Both showed solid gains, while Nedbank [JSE:NED] still lagged. Maybe the green bank will get its turn this week.
Anglo American [JSE:AGL] increased by more than 4% last week and BHP Billiton [JSE:BIL] by nearly 5%. Steel companies ArcelorMittal [JSE:ACL] and Kumba Iron Ore [JSE:KIO] both recovered sharply from the lows of the previous week.
Most industrials were also stronger, except for those food stocks and selected retailers which had a run the previous week. Pick n Pay Stores [JSE:PIK] ended the week nearly 3% lower, despite posting an increase of more than 30% in headline earnings per share in the six months to end-August. But then the shares are sitting on a PE of more than 30%.
There does not seem to be a specific reason for the stronger trend. International and local economic and financial news remains quite bleak. International fund managers still hope the US Federal Reserve would extend its programme of repurchasing bonds to stimulate the US and world economy. Growth in China is still showing no signs of increasing again to the high figures everybody has become used to.
The week ahead
Clicks Stores [JSE:CLS] will announce its results for the financial year to August this week and a few of the property groups will declare dividends and interest payments.
Gold mines will start to release quarterly results, which will probably do little to change the outlook for profits or help sentiment towards their shares.
On the economic side, Statistics SA will announce the consumer price index for September on Thursday, while the government’s mid-year budget is due to be released.
An interesting aspect of the budget will be the collection of tax: during the last few years of better economic growth, the amount of tax collected was significantly above budget. It will be interesting to see what happened in the last few months during the period of weak growth.
- Fin24
Shares do indeed offer better value than they did a few weeks ago. The price to earnings ratio (PE) on the JSE Top 40 declined from close to 20 times to below 14 times, with several of the large favourite shares sitting on ratios of around 10 times.
During the last couple of weeks, Sasol’s [JSE:SOL] share price dropped faster than the oil price to push its PE to below 9 times.
Bank shares dropped back from heady ratings to just below their historic rating, where investors were quick to snap up shares such as FirstRand [JSE:FSR] and Standard Bank [JSE:SBK]. Both showed solid gains, while Nedbank [JSE:NED] still lagged. Maybe the green bank will get its turn this week.
Anglo American [JSE:AGL] increased by more than 4% last week and BHP Billiton [JSE:BIL] by nearly 5%. Steel companies ArcelorMittal [JSE:ACL] and Kumba Iron Ore [JSE:KIO] both recovered sharply from the lows of the previous week.
Most industrials were also stronger, except for those food stocks and selected retailers which had a run the previous week. Pick n Pay Stores [JSE:PIK] ended the week nearly 3% lower, despite posting an increase of more than 30% in headline earnings per share in the six months to end-August. But then the shares are sitting on a PE of more than 30%.
There does not seem to be a specific reason for the stronger trend. International and local economic and financial news remains quite bleak. International fund managers still hope the US Federal Reserve would extend its programme of repurchasing bonds to stimulate the US and world economy. Growth in China is still showing no signs of increasing again to the high figures everybody has become used to.
The week ahead
Clicks Stores [JSE:CLS] will announce its results for the financial year to August this week and a few of the property groups will declare dividends and interest payments.
Gold mines will start to release quarterly results, which will probably do little to change the outlook for profits or help sentiment towards their shares.
On the economic side, Statistics SA will announce the consumer price index for September on Thursday, while the government’s mid-year budget is due to be released.
An interesting aspect of the budget will be the collection of tax: during the last few years of better economic growth, the amount of tax collected was significantly above budget. It will be interesting to see what happened in the last few months during the period of weak growth.
- Fin24
