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Johannesburg - Investors will have to wait longer for an answer to the question if the uptick in share prices on the JSE towards the end of last week signals the beginning of a recovery.
Particularly after Friday’s rise, when the major indices on the JSE made the biggest gains in one day in over year, there was hope that the trend would continue on Monday morning, but instead the market was moving sideways seeking direction.
It seemed if investors were waiting for new directions from Wall Street, whose gains the last few days sparked the worldwide recovery in share prices.
By midday on Monday the All-share index was 0.16% lower at 47 762, while the Top 40 index lost 0.25% to 42 630. The major loser was the Resources index, which shed 0.82% after strong recoveries towards the end of last week.
Although the resources sector is still regarded as heavily oversold, it seems that investors used the uptick in prices towards the end of last week to take quick profits.
Anglo American [JSE:AGL], which rose 4% on Thursday and Friday, lost 0.65% to R242.92. BHP Billiton [JSE:BIL] lost 1.39% to R296.67 after regaining 5% last week. Of the iron producers, which made strong recoveries last week after huge losses in the preceding weeks, Assore [JSE:ASR] strengthened further by 1.16% to R240.77, but Kumba Iron Ore [JSE:KIO] lost 0.52% to R296.05.
Sasol [JSE:SOL] improved by another 0.4% to R558.55 after its share price was pummelled in previous weeks by sharp declines in the oil price.
The rest of the market was treading water with the Financial index only 0.16% stronger and the Industrial index losing 0.10%.
Imara SP Reid said in its daily Market Snapshot on Monday morning that a combination of two days of high volume support and an improvement in very short-term momentum figures indicated a strong likelihood of a short-term trading bottom for local equities.
There is also growing consensus that the concern about the local stock market’s high valuations is disappearing.
The price to earnings ratio (PE) on the JSE Top 40 declined from close to 20 times to below 14 times, with several of the large favourite shares sitting on ratios of around 10 times. A big company like Sasol is now trading at a very attractive PE of only 9.28.
Markets also took some comfort from Friday's US data that showed the Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly lifted in early October to its highest level since July 2007, while groundbreaking for new homes improved more than expected last month.
The Bank of England’s chief economist also said on Sunday that investors may have over-reacted to signs of economic slowdown, although they have been right to price in weaker global growth prospects.
READ: BoE: Markets may have over-reacted to slowdown
But for many the question remains what will happen if the Federal Reserve’s quantitative easing comes to an end in the near future.
"We better fasten our seatbelts," said Giordano Lombardo, group chief investment officer at Pioneer Investments. Both Wall Street and European bourses saw their highest levels of turbulence in three years.
"The current phase of volatility is going to last until we see a decisive change in the policy mix that has proved to be ineffective to lift the rate of growth of the global economy."
Of the major shares in the industrial sector, Naspers [JSE:NPN] lost 1.34% to R1 200.03 despite its Chinese subsidiary Tencent rising on the Hong Kong market.
Richemont [JSE:CFR], which is trading near a 52-week low, lost 0.54% to R90.40 and SABMiller [JSE:SAB] lost 0.34% to R582.00.
- Fin24
Particularly after Friday’s rise, when the major indices on the JSE made the biggest gains in one day in over year, there was hope that the trend would continue on Monday morning, but instead the market was moving sideways seeking direction.
It seemed if investors were waiting for new directions from Wall Street, whose gains the last few days sparked the worldwide recovery in share prices.
By midday on Monday the All-share index was 0.16% lower at 47 762, while the Top 40 index lost 0.25% to 42 630. The major loser was the Resources index, which shed 0.82% after strong recoveries towards the end of last week.
Although the resources sector is still regarded as heavily oversold, it seems that investors used the uptick in prices towards the end of last week to take quick profits.
Anglo American [JSE:AGL], which rose 4% on Thursday and Friday, lost 0.65% to R242.92. BHP Billiton [JSE:BIL] lost 1.39% to R296.67 after regaining 5% last week. Of the iron producers, which made strong recoveries last week after huge losses in the preceding weeks, Assore [JSE:ASR] strengthened further by 1.16% to R240.77, but Kumba Iron Ore [JSE:KIO] lost 0.52% to R296.05.
Sasol [JSE:SOL] improved by another 0.4% to R558.55 after its share price was pummelled in previous weeks by sharp declines in the oil price.
The rest of the market was treading water with the Financial index only 0.16% stronger and the Industrial index losing 0.10%.
Imara SP Reid said in its daily Market Snapshot on Monday morning that a combination of two days of high volume support and an improvement in very short-term momentum figures indicated a strong likelihood of a short-term trading bottom for local equities.
There is also growing consensus that the concern about the local stock market’s high valuations is disappearing.
The price to earnings ratio (PE) on the JSE Top 40 declined from close to 20 times to below 14 times, with several of the large favourite shares sitting on ratios of around 10 times. A big company like Sasol is now trading at a very attractive PE of only 9.28.
Markets also took some comfort from Friday's US data that showed the Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly lifted in early October to its highest level since July 2007, while groundbreaking for new homes improved more than expected last month.
The Bank of England’s chief economist also said on Sunday that investors may have over-reacted to signs of economic slowdown, although they have been right to price in weaker global growth prospects.
READ: BoE: Markets may have over-reacted to slowdown
But for many the question remains what will happen if the Federal Reserve’s quantitative easing comes to an end in the near future.
"We better fasten our seatbelts," said Giordano Lombardo, group chief investment officer at Pioneer Investments. Both Wall Street and European bourses saw their highest levels of turbulence in three years.
"The current phase of volatility is going to last until we see a decisive change in the policy mix that has proved to be ineffective to lift the rate of growth of the global economy."
Of the major shares in the industrial sector, Naspers [JSE:NPN] lost 1.34% to R1 200.03 despite its Chinese subsidiary Tencent rising on the Hong Kong market.
Richemont [JSE:CFR], which is trading near a 52-week low, lost 0.54% to R90.40 and SABMiller [JSE:SAB] lost 0.34% to R582.00.
- Fin24
