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By midday the JSE was almost 1% down after strong gains the previous two days. The rand also surrendered the strong gains of the previous two days and slipped back to R14.30 a dollar.
READ: Rand on the back foot amid rate hike uncertainty
There was also concern on world markets and China’s stocks fell for a second day after President Xi Jinping said the world’s second-biggest economy was facing “considerable downward pressure”. The Shanghai Composite Index slid 1% to 3 568.47 at the close, led by industrial and technology companies.
The state of the Chinese economy is of particular concern for South Africa, as China is the biggest buyer of South African commodities. Latest data showed China’s home price recovery slowed in October, adding to a slew of reports including manufacturing and exports that show the government may struggle to achieve its 7% growth target for this year.
By midday the All-share index was again 0.98% lower at 51 472 points and the index is still below the 200-day moving average. The Top 40 index also gave up valuable gains and traded 1.01% lower at 46 279 points, again testing important resistance levels.
The Financial index, which gained more than 2% on Tuesday, gave more than half of it back on Wednesday morning and lost 1.28%. At that stage the Industrial index was also 1.09% softer, but the Resources index lost only 0.23%.
The market is divided over whether the Reserve Bank will leave benchmark rates unchanged at its policy meeting on Thursday. According to a Reuters poll, 21 of 35 economists predict rates will be held at 6.00% with the other 14 forecasting a hike.
The Reserve Bank is under pressure to raise interest rates to protect the rand against further losses in case the Federal Reserve raises US interest rates in December, but higher rates might slow down an already struggling economy even further. The rand has already lost more than 20% against the dollar, which is currently on a seven-month high.
"The problem with rand weakness is that it starts a vicious circle, where investors choose to withdraw rand bond and equity investments to avoid further currency losses, which in turn drives further rand weakness," said Investec economist Annabel Bishop.
The Reserve Bank will also consider the influence of a weaker rand on inflation, which seems to still be under control. It was announced on Wednesday that the annual consumer price inflation was 4.7% in October 2015, up from 4.6% in September 2015 but lower than the 4.9% expected by economists.
The consumer price index increased by 0.3% month-on-month in October 2015.
READ: Inflation surprises on the downside
Technical analysts also warned at the start of the day’s trading that the gains of the previous two days, which were mostly the result of bargain-hunting in an oversold market, were unsustainable as the technical picture for most indices indicates further selling pressure.
The market seems to be trading in a relatively narrow band, as every move in share prices is used to lock in profits or pick up bargains.
There seems to be much interest in retail stocks of late, with Woolworths [JSE:WHL] performing strongly after a solid sales report. The share was at one stage more than 4% higher at R104.63 but traded 3.36% stronger at R103.50 at midday on Wednesday. On Tuesday Shoprite [JSE:SHP] gained more than 4%, but lost 1.15% on Wednesday to R140.41.
Woolworths said sales gained 18% in the first 20 weeks of its financial year, boosted by the Australian chain David Jones which was acquired last year. Excluding David Jones, revenue advanced 12% in the period ending November 15 which was in line with the same period last year.
South African retailers are showing positive momentum as a more reliable power supply and falling fuel prices help consumers. Retail sales rose about 4.1% in September, according to the average estimate of economists polled by Bloomberg, compared with 3.9% the previous month.
Most of the big industrial shares gave up Monday’s gains. Naspers [JSE:NPN], which reached a new all-time high on Tuesday, traded 1.95% below that high at R2 138.42. Sasol [JSE:SOL] was 0.29% lower at R400, 84 after strong gains the previous two days.
MTN [JSE:MTN] continued its slide of the past few days and lost another 2.3% to reach yet another 52-week low of R138.88.
Sanlam [JSE:SLM], one of the front runners in Monday’s strong performance by the financial sector, lost 3.30% to R57.67 on Wednesday morning
The resources sector was a mixed bag, with BHP Billiton [JSE:BIL] losing 0.33% to R189.87 but Anglo American [JSE:AGL] trading 1.07% higher at R95.19.
