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Port Elizabeth - The JSE fell by around another 3% last week, wiping out all the gains since March this year.
There is little indication of a reversal of the trend, except for a few technical indicators to show the market is oversold in the short term.
It is ironic that everybody seems to take technical analysis seriously all of a sudden. Technical analysts and their charts are usually regarded with scorn when they say the market is overbought and due for a correction.
The JSE is not alone in this.
World markets were all on the back foot for most of last week and the FTSE ended Friday on a 12 month low, while other European markets and the US fell by around 1% on Friday.
Prospects for the SA economy and company earnings still look bleak.
Last week the International Monetary Fund (IMF) joined the host of other institutions to trim back SA’s economic prospects, while world markets all fell back on fears of lower economic growth.
Hard figures give more proof.
SA's manufacturing output continued to decline during August, falling by just more than 1% after the 8% decline in July.
Mining production fell by 10% compared to August last year, a message the international guests at the important annual mining indaba have been discussing the whole of last week.
It is, therefore, not surprising that most commodity shares ended the week sharply lower.
Sasol [JSE:SOL] fell 9.3% and Arcelor Mittal SA [JSE:ACL] declined by more than 7% following news that there are moves to optimise its output - read to mean closing some plants to reduce production of mild steel in a market heading for a oversupply.
Gold shares continued to decline with AngloGold Ashanti [JSE:ANG] falling another 5% and Gold Fields [JSE:GFI] dropping another 2.2%.
Platinum shares did not look much better either, despite indications that production volumes are increasing steadily after the long strike earlier this year.
BHP Billiton declined by nearly 4% as the news of the restructuring of its asset portfolio and its effects are slowly being studied and realised.
Diversified industrial groups were also not in demand on the JSE. For instance, popular Bidvest [JSE:BVT] and Remgro [JSE:REM] both lost around 3.5%.
Other portfolio cornerstones SAB Miller [JSE:SAB] fell 4% and Richemont dropped another 2%. British American Tobacco SA [JSE:BTI] fell 3%.
Food shares and a few retail counters bucked the weaker trend. Astral Foods [JSE:ARL] picked up 3.4% and AVI [JSE:AVI] added 2%. JD Group [JSE:JDG] increased 3% after long months of declines.
It is interesting that defensive food and similar shares, such as Pick n Pay [JSE:PIK], Shoprite [JSE:SHP] and Clicks [JSE:CLS], declined as well.
Pick n Pay published good earnings for the 6 months to August. The other shares all seem to be on reasonable price/earnings ratios with fairly good prospects.
The week ahead
Investors can expect no more than slightly smaller declines in share prices or, if we are lucky, a slight improvement.
Fact is that economic reality is not going the change in the next five days.
SAB Miller [JSE:SAB] will issue a trading update to give investors some guidance on what to expect in the results for the six months to September.
Mondi [JSE:MND], Altron [JSE:ATN], Astrapak [JSE:APK] and PSG Group [JSE:PSG] are due to announce interim results for the six months to end August within the next week or two.
- Fin24
