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Johannesburg - The JSE lost further ground on Tuesday as investors took more profits amid a growing feeling on global markets that the post-Brexit rally has run its course.
By mid-morning on Tuesday major indices on the JSE were more than 1% down on Monday's close with the most of the indices significantly lower, except the Gold index.
The profit-taking on the JSE already started on Monday, but since then enthusiasm for new record highs on global markets has subsided drastically, helped along by a downturn in crude oil prices which put a damper on energy stocks.
The major indices on Wall Street still reached new highs on Monday night, but on Tuesday morning Asian shares started slipping after reaching a nine-month high last week, with the major European markets losing about 1%.
Analysts said the levels reached last week on global markets are technically in an overbought area and prompted profit-taking.
"It's hard to maintain consistent optimism when markets attain such high levels, and some profit-taking is natural," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank in Tokyo.
By mid-morning the All-share index was 1.09% softer at 52 468 points, while the Top 40-index traded 1.27% down at 45 842 points. The Industrial index dropped 1.12%, the Financial index shed 0.89% and the Resources index was 1.65% weaker.
At Tuesday morning’s level the All-share index is still about 2% lower than the 53 585 points it closed at on June 22, the day before the Brexit referendum. It is also about 4% softer than its high for the year of 54 474 points reached in April this year.
The oil price continued to take a toll on related sectors after it dropped to below $47 per barrel, as rising stockpiles of crude and refined fuel intensified fears of another major supply glut.
"Traders and investors are torn which way prices are going to break. It's a knife edge between optimism and pessimism," said Ben Le Brun, market analyst at Sydney's optionsXpress.
A failed coup in Turkey also dented risk sentiment. On Monday, Turkey purged its police force after rounding up thousands of soldiers. It also called for the United States to hand over a cleric the Turkish government accuses of being behind the takeover attempt.
Resources shares were again among the big losers, with Merafe Resources [JSE:MRF] trading 5.26% lower at only 0.90c. South32 [JSE:S32], which was unbundled from BHP Billiton [JSE:BIL] which reached a new 52-week high last week, lost 4.83% to R19.82.
Among the big dual-listed resources shares Anglo American [JSE:AGL] lost 4.02% to R151.05, while Glencore [JSE:GLN] gave up 5.07% to trade at R33.55.
Sasol’s [JSE:SOL] share price shed 1.04% in reaction to the lower oil price, as its income from synthetic fuel is determined by the oil price. The company gained 3.68% during last week’s strong rally on the JSE, but the share price is still 7.6% softer over the past 30 days.
The attention is on SABMiller [JSE:SAB] and Anheuser-Busch InBev (AB InBev) [JSE:ANB] this week, as analysts expect activists to use SABMiller’s annual general meeting on Thursday to push for a higher offer for the company from AB InBev, as the drop in sterling now appears to favour its two main shareholders.
The main offer is now lower than a special cash-and-stock offer designed for SABMiller’s tow biggest investors, cigarette maker Altria and Colombia’s Santo Domingo family, who together own about 40% of the company.
SABMiller traded 0.40% lower at R834.46 while AB InBev lost 0.53% to R1 790.00.
The Gold index gained 1.85% and two major gold shares, Gold Fields [JSE:GFI] and Sibanye [JSE:SGL], traded at new 52-week highs. At mid-morning Gold Fields was 2.41% up at a high of R86.66 and Sibanye rose 1.83% to a high of R62.86.
