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Port Elizabeth -The JSE continued its downward trend during the last week amid indications that the next week will not be much better.
Just about every market report and every fund manager is currently reminding investors of the challenges facing the share market: decreasing consumer spending, high levels on consumer debt, low economic growth, high inflation, high fuel prices, the overhang of the past labour strikes and risk of more disruptions to an already frail economy.
Company earnings and share prices just cannot increase indefinitely at a faster rate than the economic growth rate. The dismal economic growth of 0.6% year-on-year in the June quarter (plus average inflation of around 6% during the last 12 months) gives a rough indication of what investors should expect on their portfolios.
In some cases company earnings and share prices are far above this very simplistic yardstick and bound to slow down. In other cases company earnings have already slowed, but share prices kept on running to put shares on unrealistic forward price to earnings ratios.
One of the shares in the latter category seemed to have surprised investors this week: Imperial Group [JSE:IPL] announced that earnings for the year to June dropped by 7% and the share ended the week another 2% lower.
Impala Platinum [JSE:IMP] did warn earlier that the long strike had a severe impact on its figures and the share shed 4.1% during the week. Anlgo American Platinum [JSE: AMS] followed in sympathy, with a similar decline ahead of its earnings announcement sometime during the next few weeks.
Anglo American [JSE:AGL] and BHP Billiton [JSE:BIL] dropped by just more than 2%, while Kumba Iron Ore [JSE:KIO] took the brunt of the change in market sentiment towards base metal producers and fell nearly 5%.
One could count the increases in prices of industrial and financial companies without using a pen and paper. Adcock Ingram [JSE:AIP] was weak after its bad results and warning by management that the next year and even two will be difficult. Bidvest [JSE:BVT] dropped by nearly 3% and most banks were a percent or two lower.
One of the better performers was Woolworths [JSE:WHL] which managed an increase of about 1% for the week after its announcement that earnings increased by nearly 10% during its financial year to end June.
Defensive stocks such as Clicks Stores [JSE:CLS] and Pick n Pay [JSE:PIK] weathered the growing storm better thus far. In contrast, Shoprite [JSE:SHP] and Truworths [JSE:TRU] did not look too strong.
The week ahead
There is nothing like a bit of international intrigue, a war or two and political uncertainty to give the gold price a little boost and excite gold bulls. DRDGold [JSE:DRD] and Gold Fields [JSE:GFI] increased sharply last week, by 6.6% and 12.6% respectively. This week will show if it will continue.
JD Group [JSE:JDG], Bidvest [JSE:BVT] and Discovery [JSE:DSY] are due to announce annual results for the year in the next week, while figures of foreign buying and selling of SA shares and bonds will probably be watched by more people than usual once the JSE reports the net sales on Monday.
Meanwhile, technical analysts will be waiting for confirmation that the market is set to continue downwards.
-Fin24
Just about every market report and every fund manager is currently reminding investors of the challenges facing the share market: decreasing consumer spending, high levels on consumer debt, low economic growth, high inflation, high fuel prices, the overhang of the past labour strikes and risk of more disruptions to an already frail economy.
Company earnings and share prices just cannot increase indefinitely at a faster rate than the economic growth rate. The dismal economic growth of 0.6% year-on-year in the June quarter (plus average inflation of around 6% during the last 12 months) gives a rough indication of what investors should expect on their portfolios.
In some cases company earnings and share prices are far above this very simplistic yardstick and bound to slow down. In other cases company earnings have already slowed, but share prices kept on running to put shares on unrealistic forward price to earnings ratios.
One of the shares in the latter category seemed to have surprised investors this week: Imperial Group [JSE:IPL] announced that earnings for the year to June dropped by 7% and the share ended the week another 2% lower.
Impala Platinum [JSE:IMP] did warn earlier that the long strike had a severe impact on its figures and the share shed 4.1% during the week. Anlgo American Platinum [JSE: AMS] followed in sympathy, with a similar decline ahead of its earnings announcement sometime during the next few weeks.
Anglo American [JSE:AGL] and BHP Billiton [JSE:BIL] dropped by just more than 2%, while Kumba Iron Ore [JSE:KIO] took the brunt of the change in market sentiment towards base metal producers and fell nearly 5%.
One could count the increases in prices of industrial and financial companies without using a pen and paper. Adcock Ingram [JSE:AIP] was weak after its bad results and warning by management that the next year and even two will be difficult. Bidvest [JSE:BVT] dropped by nearly 3% and most banks were a percent or two lower.
One of the better performers was Woolworths [JSE:WHL] which managed an increase of about 1% for the week after its announcement that earnings increased by nearly 10% during its financial year to end June.
Defensive stocks such as Clicks Stores [JSE:CLS] and Pick n Pay [JSE:PIK] weathered the growing storm better thus far. In contrast, Shoprite [JSE:SHP] and Truworths [JSE:TRU] did not look too strong.
The week ahead
There is nothing like a bit of international intrigue, a war or two and political uncertainty to give the gold price a little boost and excite gold bulls. DRDGold [JSE:DRD] and Gold Fields [JSE:GFI] increased sharply last week, by 6.6% and 12.6% respectively. This week will show if it will continue.
JD Group [JSE:JDG], Bidvest [JSE:BVT] and Discovery [JSE:DSY] are due to announce annual results for the year in the next week, while figures of foreign buying and selling of SA shares and bonds will probably be watched by more people than usual once the JSE reports the net sales on Monday.
Meanwhile, technical analysts will be waiting for confirmation that the market is set to continue downwards.
-Fin24
