JSE ALL SHARE INDEX (ALSI) TALKING POINTS
- Rand strength hurts SA40.
- South African Q2 business confidence drops to 42 from 46 previously.
FTSE/JSE ALL SHARE INDEX FUNDAMENTAL BACKDROP
South African stocks took a turn lower on Wednesday despite the broader uptick in Emerging Market (EM)[1] equity markets due to an extremely resilient rand[2]. The rand and the JSE Top 40 index traditionally exhibits an inverse relationship and while the dollar is higher against most global currencies, the rand’s ties with the Chinese economy has provide support to the ZAR. China’s zero tolerance policy on COVID-19 has eased somewhat giving rise to commodity-linked currencies.
Most sectors[3] are in the red today barring tech which has been propped up by Naspers Ltd (+9.5%) but overall pessimism around global growth forecasts and impending rate hikes have weighed on global equities.
FTSE[4]/JSE TOP 40 SECTOR SUMMARY
Source: Refinitiv
Today’s South African business confidence miss for Q2 added to the index performance highlighting the drop in optimism from senior executives in building, trade and manufacturing sectors respectively. This marks a figure even lower than the 2021 unrest period at 43.
SOUTH AFRICA ECONOMIC CALENDAR
Source: DailyFX economic calendar[5]
FTSE/JSE TOP 40 EARNINGS CALENDAR
Source: Investing.com
TECHNICAL ANALYSIS
FTSE/JSE ALL SHARE INDEX DAILY CHART
Chart prepared by Warren Venketas[6], IG
SA40 price action[7] shows the recent slump pushing off the medium-term trendline resistance zone (black). South African stocks will likely remain under pressure as global rates move higher, muted Chinese demand and soaring inflation ravages emerging market indices which leads me to believe subsequent support targets continue to be favorable.
Resistance levels:
