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Johannesburg - The correction on the JSE continued on Friday morning, and the major indices are now approaching important resistance levels which must be held to prevent further damage.
The Top 40 index is on particularly thin ice as it is approaching the 200-day moving average. A break below that average can lead to further selling pressure, but according to technical analysts it could also provide some support.
By midday the All-share index was another 0.76% lower at 51 661 points, after trading above 53 000 earlier in the week. Before Friday’s loss the index had already 4.67% lost over the previous seven days.
The Top 40 index was 0.78% lower at 46 422 points, which meant that it has already broken through two resistance levels this week, at 47 200 points and then at 46 800 points.
The mood in world markets is similar to that on the JSE, with the major Wall Street indices also approaching 200-day moving averages after being seriously overbought. The Industrial index, whose dual-listed conglomerates depend on what is happening abroad, lost more than 1% in morning trade on Friday.
The Financial index, which is highly sensitive to the weak rand, lost another 1.17% as the rand did not respond to the weaker dollar and still traded at R14.31 to the dollar by midday on Friday.
Among the giants in the industrial sector Naspers [JSE:NPN] lost 2.45% to R2 089.59 and SABMiller [JSE:SAB] traded 0.30% softer at R875.35. MTN [JSE:MTN] lost another 0.66% to R146.03 as the company’s deadline to pay a fine of R71bn to the Nigerian authorities is fast approaching. MTN’s executive chairperson Phuthuma Nhleko is currently in Nigeria to try and salvage the situation.
Altron [JSE:AEL] was the surprise of the morning as the share price was at one stage more than 17% higher, after closing on a new 52-week low of R5.01 on Thursday.
The company posted disappointing results on Thursday which hurt the share price, but it also announced measures to stem the tide which was a good enough reason for bargain hunters to climb in on Friday morning. By midday the share price was 9.78% stronger at R5.50.
Revenue retreated 6.5% to R13.29bn, with 21% of the income coming from operations to be discontinued. Revenue from continued operations fell 8%, more than the fall in group revenue, a testament to the difficult trading conditions.
Group operating profit tumbled 181% with continuing operations contributing a loss of R67m. That culminated in an unprecedented headline loss of 64 cents per share (first-half 2015 72c profit).
Altron also announced that it is finalising the disposal of Powertech Transformers (Eskom dependent) and the Altech Autopage subscriber base. Autopage is reeling from reduced mobile termination rates.
On Friday morning investors started to discount the possible influence of the drought on food companies. AVI [JSE:AVI] was the biggest loser, and the share price dropped 5.51% to R83.40 after being more than 7% lower. Tiger Brands [JSE:TBS] was at one stage more than 4% down but by midday traded only 1.60% softer at R316.60
The only major sector in the black on Friday was Resources, which gained 1.32% after losing more than 17% over the previous seven days.
The technical analysts at Imara SP Reid said in their daily Market Snapshot that resources are exceptionally oversold in the short term and the sector should offer a short-term trading opportunity within the next session or two.
Anglo American [JSE:AGL] edged back to above R100 a share on Friday and by midday was 1.01% higher at R100.50. BHP Billiton [JSE:BIL] was 0.34% stronger at R194.63. Glencor [JSE:GLN] was the best performer among the commodity conglomerates and traded 2.72% higher at R21.77.
