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Johannesburg - The local stock market is still in the grips of modest profit-taking after the recent strong recovery run.
Analysts said there is a possibility that the short-term selling pressure can continue, as there are indications that overseas investors are deserting emerging markets, which is driving the rand and bond prices lower.
The weaker rand gives a little bit of support for resources shares, which recovered somewhat but have been continuing losses the last few days.
By midday on Thursday the All-share index was 0.24% lower at 49 598 points, while the Top 40 index lost 0.16% to 44 326 points.
Technical analysts from Imara SP Reid said in their daily Market Snapshot on Thursday morning the short-term picture for the Top 40 index is not decisive, but continues to hint at the potential for sustained short-term selling pressure. A move back towards the important level of 43 600 points is a realistic technical outcome.
The index must consolidate above that level for any future upward movements to be sustainable.
The analysts said it is still appropriate to use the current technical strength of the market to lock in profits.
The weakness of the rand is an indication that the international sentiment towards emerging markets is turning negative and international investors are opting for the safe-haven dollar.
There is also selling pressure in the bond market, with South African government bonds tracking the rand weaker. The benchmark issue due in 2026 traded at 8.035%, a level last seen on October 21.
“Although the gold price is also affecting bonds, the main driver is the Russian rouble which is touching fresh lows,” said Mark Southworth, a bond trader at CITI Bank.
On Wednesday the Russian central bank halted interventions to support the rouble, after it had spent billions of dollars a day to prop up a currency battered by sanctions and falling oil prices.
The Russian bank's move, as well as continued tensions between Russia and Ukraine, culminated in sentiment towards emerging market assets turning negative.
The Industrial index moved 0.54% lower. Industrial shares were a mixed picture on Thursday, particularly the double-listed shares with big market capitalisations so popular with overseas investors.
Naspers [JSE:NPN] dropped 1.27% to R1 372.08 and SABMiller [JSE:SAB] lost 1.21% to R621.38. Richemont [JSE:CFR] defied the odds and gained 0.52% to R92.15 and British American Tobacco [JSE:BAT] was only 0.16% higher at R635.47.
Gold shares seem to be reaching for the bottom after the Gold index lost more than 20% over the last month. By midday on Tuesday the index was only 0.24% lower, after dropping more than 4% on Wednesday.
Harmony [JSER:HAR] was another 1.48% down at R18.00, but AngloGold Ashanti [JSE:ANG] recovered by 0.98% to R100.01 and Gold Fields [JSE:GFI] improved by 0.78% to R36.27.
The weaker rand supported the oversold Resources index, which gained 0.77% by midday on Thursday. Anglo American [JSE:AGL] was 0.41% higher at R234.78 and BHP Billiton [JSE:BIL] strengthened by 0.96% to R288.31. Iron ore producer Assore [JSE:ASR] recovered by 1.92% to R206.41, but is still 50.1% lower than six months ago.
- Fin24
Analysts said there is a possibility that the short-term selling pressure can continue, as there are indications that overseas investors are deserting emerging markets, which is driving the rand and bond prices lower.
The weaker rand gives a little bit of support for resources shares, which recovered somewhat but have been continuing losses the last few days.
By midday on Thursday the All-share index was 0.24% lower at 49 598 points, while the Top 40 index lost 0.16% to 44 326 points.
Technical analysts from Imara SP Reid said in their daily Market Snapshot on Thursday morning the short-term picture for the Top 40 index is not decisive, but continues to hint at the potential for sustained short-term selling pressure. A move back towards the important level of 43 600 points is a realistic technical outcome.
The index must consolidate above that level for any future upward movements to be sustainable.
The analysts said it is still appropriate to use the current technical strength of the market to lock in profits.
The weakness of the rand is an indication that the international sentiment towards emerging markets is turning negative and international investors are opting for the safe-haven dollar.
There is also selling pressure in the bond market, with South African government bonds tracking the rand weaker. The benchmark issue due in 2026 traded at 8.035%, a level last seen on October 21.
“Although the gold price is also affecting bonds, the main driver is the Russian rouble which is touching fresh lows,” said Mark Southworth, a bond trader at CITI Bank.
On Wednesday the Russian central bank halted interventions to support the rouble, after it had spent billions of dollars a day to prop up a currency battered by sanctions and falling oil prices.
The Russian bank's move, as well as continued tensions between Russia and Ukraine, culminated in sentiment towards emerging market assets turning negative.
The Industrial index moved 0.54% lower. Industrial shares were a mixed picture on Thursday, particularly the double-listed shares with big market capitalisations so popular with overseas investors.
Naspers [JSE:NPN] dropped 1.27% to R1 372.08 and SABMiller [JSE:SAB] lost 1.21% to R621.38. Richemont [JSE:CFR] defied the odds and gained 0.52% to R92.15 and British American Tobacco [JSE:BAT] was only 0.16% higher at R635.47.
Gold shares seem to be reaching for the bottom after the Gold index lost more than 20% over the last month. By midday on Tuesday the index was only 0.24% lower, after dropping more than 4% on Wednesday.
Harmony [JSER:HAR] was another 1.48% down at R18.00, but AngloGold Ashanti [JSE:ANG] recovered by 0.98% to R100.01 and Gold Fields [JSE:GFI] improved by 0.78% to R36.27.
The weaker rand supported the oversold Resources index, which gained 0.77% by midday on Thursday. Anglo American [JSE:AGL] was 0.41% higher at R234.78 and BHP Billiton [JSE:BIL] strengthened by 0.96% to R288.31. Iron ore producer Assore [JSE:ASR] recovered by 1.92% to R206.41, but is still 50.1% lower than six months ago.
- Fin24
