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South African JSE Top 40 Price Forecast: Index Weighed Down by Rand, Rates and Growth

South African JSE Top 40 Price Forecast: Index Weighed Down by Rand, Rates and Growth

Warren Venketas, Analyst

JSE ALL SHARE INDEX (ALSI) TALKING POINTS

  • Rand strength hurts SA40.
  • South African Q2 business confidence drops to 42 from 46 previously.
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FTSE/JSE ALL SHARE INDEX FUNDAMENTAL BACKDROP

South African stocks took a turn lower on Wednesday despite the broader uptick in Emerging Market (EM) equity markets due to an extremely resilient rand. 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 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/JSE TOP 40 SECTOR SUMMARY

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

south african business confidence

Source: DailyFX economic calendar

FTSE/JSE TOP 40 EARNINGS CALENDAR

ALSI earnings calendar

Source: Investing.com

TECHNICAL ANALYSIS

FTSE/JSE ALL SHARE INDEX DAILY CHART

JSE top 40 daily chart

Chart prepared by Warren Venketas, IG

SA40 price action 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:

Support levels:

Contact and follow Warren on Twitter: @WVenketas

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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