EMELIA SITHOLE, Johannesburg | Friday 5.00pm.
US equity markets and local currency blues should continue setting the pace for the South African stock market next week with portfolio managers bracing for further volatility.
Portfolio managers said although local equities looked relatively cheap following recent losses and a depreciating rand, investors were slow to take the bait due to a lack of confidence in equities.
”Many of our shares are very cheap but the moment the Dow (Jones Industrial Average) falls we also fall… the next week is going to be very risky,” said Louis Venter, a portfolio manager with brokerage house EW Balderson.
”If the Dow moves sideways, maybe we’ll move up a bit but if the Dow goes down we’re just going to go down also,” Venter said.
Venter and Appleton Securities portfolio manager and director Greg Amoils said an ailing rand and contagion from Zimbabwe’s land-grab crisis were keeping investors sidelined.
”Shares are cheap in foreign terms but no one is stepping up to buy them…There’s a lot of underlying volatility but at the moment it’s just listless. In the short-term I see that continuing,” Amoils said.
”The rand is weak, our closest neighbour — one of our biggest trading partners Zimbabwe — is falling apart, your interest rate decline has certainly ended…world markets have been nervous… why should anyone buy shares,” Amoils said.
The rand has been under pressure for the past month from a resurgent dollar and a weakening euro — the main currency in its trade-weighted basket — as well as rising political violence in Zimbabwe ahead of parliamentary elections in June.
The local unit was last trading at 7.1750 to the dollar, slightly off Thursday’s record low of 7.18 in an edgy market ahead of the outcome of the central bank’s six-weekly monetary policy meeting.
The market is looking for a hawkish statement from the central bank but anticipate no rate change to fight inflationary pressures.
The rand’s weakness is expected to provide some fillip for resource stocks, traditional hedges against the rand as commodity producers are generally big exporters and hence earn hard currency.
But the rest of the market is expected to drift lower on lack of fresh positive economic news to turn sentiment around.
Technology shares in particular are seen remaining under pressure after the US tech-rich Nasdaq’s sharp falls on Thursday which depressed global markets on Friday.
The Johannesburg Stock Exchange’s benchmark All Share index was last down 2.13% at a six-week low of 7,261.9 n Friday, led by losses in technology issues and interest-rate sensitive financial shares. — Reuters