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Johannesburg - Profit-taking on the JSE continued on Wednesday morning, but analysts say the technical picture for South African shares currently look much better than two or three weeks ago.
By midday the major indices were all more than 1% down, but the All-share and Top 40-indices were both still above important technical resistance levels. By midday the All-share index was already 1.29% lower on 52 221 points and the Top 40-index had fell 1.35% to 46 617 points.
The technical analysts of Imara SP Reid said in their daily market snapshot that both the All-share and Top 40-index are still holding above their 65-day moving averages.
These averages are important support levels for both indices. If they can survive a modest bout of short term profit taking, further upside momentum is suggested as the overall technical structure of both indices are much improved from two or three weeks ago.
For the Top 40-index the level of 46 560 points is, however, of big importance and further downside is possible if the index break back below that level.
At midday the industrial index was already 1.22% lower, the financial index lost 1.08% and the resources index was 2.48% lower. The gold index has lost 1.65% at that stage.
There was little support from overseas markets Wednesday morning, as Wall Street and major European markets fell back due to disappointing results from technology companies.
Apple, the biggest company in the world, performed weaker than expected, while IBM and United Technologies also disappointed. Markets in the developed world are currently focusing on earnings as there are concerns about valuations being too high.
Big conglomerates with double listings in London and on the JSE represent more than 60% of the JSE’s market capitalisation and if these shares are under pressure in London, the local market is also affected, particularly the industrial index.
The biggest losers were the big resource companies that are also listed in London. BHP Billiton [JSE:BIL] lost 2.99% to trade at R233.00 and Anglo American [JSE:AGL] was 2.22% lower on R161.49. Glencore [JSE:GLN] traded 2.54% weaker on R45.24.
Imara SP Reid said this morning that commodities remain mostly under pressure, largely as a result of the stronger dollar, medium term technical considerations and evidence which suggests that final demand remains lacklustre rather than particularly vibrant.
Kumba [JSE:KIO] which fell more than 4% at one stage on Tuesday after it suspended its half year dividend due to plunging profits, was another 1.70% lower to trade at R120.71.
The share price is now less than a third of the 52-week high of R383.35 reached last year. The company reported that headline earnings per share were down 61% and it warned that low iron ore prices could scupper its annual dividend as well.
Amongst the big industrial shares Naspers [JSE:NPN] lost 3.33% to R1 868.01, but SABMiller [JSE:SAB] was only 0.21% softer on R669.90. Richemont [JSE:CFR] dropped 0.63% to R103.29.
Banking shares were also lower with Nedbank [JSE:NED] losing 1.93% to R252.82. Standard Bank [JSE:SBK] was one of the busiest shares on the JSE and the share price fell with 1.13% to R154.88.
Investors are waiting to see what will happen to interest rates at the meeting of the Monetary Policy Committee which ends tomorrow. Stats SA announced on Wednesday that the headline inflation rate in June 2015 was 4.7%.
