The JSE is likely inch lower on Wednesday in line with other world markets, while the rand is holding steady at a four-week high against the dollar after strengthening for the seventh consecutive session.
SA banking stocks could take a breather, having gained 15% by the end of August, its best monthly gain since last November and back to pre-Covid-19 levels.
Other SA Inc stocks, such as retailers, have been particularly strong over the past few weeks, suggesting that investors expect SA’s economic recovery to gain momentum.
But the top end of the market remains wobbly, with the resource 10 index losing 6.5% in August, dragging the all share index down 2.2% over the same period. Commodity shares tracked underlying commodity prices, which have been volatile in recent weeks.
PSG Asset Management fund managers Shaun le Roux and Justin Floor said in a note that, just like in 2003, the SA market is blessed with quality businesses trading at deeply discounted valuations as the global economy emerges from a deep recession.
“Domestic investors have fled underperforming local equities in favour of income funds and high-flying global investments, while foreign investors have materially reduced exposure to SA equities over a number of years. The latter was partly as a result of our lower weighting within emerging market indices but also due to poor sentiment towards ‘higher-risk’ emerging markets,” they wrote in a note.
“Against this backdrop, we think it highly likely that certain SA companies will grow profits substantially over the next few years.”
Elsewhere, commodity prices were mostly moderately weaker, though Brent crude edged up 0.60% to $72.09 a barrel ahead of a meeting by oil cartel Opec and its allies to discuss oil output.
The rand was relatively flat on the day at R14.5227/$.