South African stocks maintained their downhill march on Thursday and analysts said there was scope for a further decline in the face of a poor domestic economic outlook, technical factors and depressed commodity prices. Among Thursday's decliners, Nedbank shed 1.8 percent to 214 rand after it said it would take a 20 percent stake in pan-African lender Ecobank Transnational for $493 million in cash, ending months of speculation it could walk away from the deal over governance concerns.
Losses were broad-based, with mining companies also deep in the red, including iron ore producer Assore, which lost 2 percent. Its losses so far this year stand at around 43 percent as iron ore prices, which are near five-year lows, crumple over mounting concerns about economic growth in China.
Overall, the outlook for the South African market, which has lost almost 9 percent from record peaks reached in July, is becoming decidedly bearish. "This correction is long overdue. The market has been running out of momentum and much of the data coming out of South Africa is not a good news story for the economy," said George Glynos, managing director of financial consultancy ETM. Africa's most advanced economy narrowly missed a recession in the first quarter when it grew a tepid 0.6 percent. Consumers are heavily indebted and inflation is quickening. "People need to take profits and reassess the situation and reposition themselves," said Glynos.
The benchmark Top-40 index shed 1.66 percent to 42,956.68 and the wider All-share index slipped 1.4 percent to 48,189. Glynos said the Top-40 could get some technical support around these levels, which were its lows in April, but it could target 40,000 if it breaks below them. On the other hand, there are momentum indicators which suggest the market is oversold and could get support. Decliners outnumbered advancers 194 to 115, according to preliminary bourse data, while around 190 million shares changed hands.
Comments
Comments are closed.