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SA Stocks Follow China Lower as Commodities Sink

SOUTH AFRICA
  • SA stocks have resumed their slide this morning, following on from a weaker APAC session on the back of worse than expected trade data. Underperformance in Chinese stocks is closely correlated to SA’s Top40 index due to China’s status as SA’s largest export partner. Additionally, index heavyweight Naspers’ stake in Chinese tech giant Tencent is another key driver of the correlation.
  • Commodities have been hit by twin risks from a firmer USD and lower Chinese growth expectations – forcing precious metals to correct lower in recent weeks. Commodity prices peaked in early March and have declined by -3-15% in SA’s key exports (platinum, gold, iron ore, palladium, rhodium etc) since the start of April. YTD, silver, platinum & gold are the three major underperformer, while rhodium and palladium have been somewhat more resilient.
  • SA commodities

  • The top40 Index has fallen -16.44% from the 03 March high at 71,816, and is now holding around the 60k mark (October 2021 levels). The RSI remains in oversold territory and the MACD below the signal line, but the histogram has yet to slow its move lower – signalling bearing momentum remains intact. The index currently trades off a 9.84x P/E ratio and 1.82X P/B, which stands below the MSCI EM P/E of 11.61x, but above the P/B of 1.54x.
  • From here, SA stock bulls will be monitoring the status of lockdowns in China and PBoC support for the Chinese economy for signs of a potential reversal or continuation. The next downside support is seen at 58,803 & 54,680, while key resistance is defined at 63,969.

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  • SA stocks have resumed their slide this morning, following on from a weaker APAC session on the back of worse than expected trade data. Underperformance in Chinese stocks is closely correlated to SA’s Top40 index due to China’s status as SA’s largest export partner. Additionally, index heavyweight Naspers’ stake in Chinese tech giant Tencent is another key driver of the correlation.
  • Commodities have been hit by twin risks from a firmer USD and lower Chinese growth expectations – forcing precious metals to correct lower in recent weeks. Commodity prices peaked in early March and have declined by -3-15% in SA’s key exports (platinum, gold, iron ore, palladium, rhodium etc) since the start of April. YTD, silver, platinum & gold are the three major underperformer, while rhodium and palladium have been somewhat more resilient.
  • SA commodities

  • The top40 Index has fallen -16.44% from the 03 March high at 71,816, and is now holding around the 60k mark (October 2021 levels). The RSI remains in oversold territory and the MACD below the signal line, but the histogram has yet to slow its move lower – signalling bearing momentum remains intact. The index currently trades off a 9.84x P/E ratio and 1.82X P/B, which stands below the MSCI EM P/E of 11.61x, but above the P/B of 1.54x.
  • From here, SA stock bulls will be monitoring the status of lockdowns in China and PBoC support for the Chinese economy for signs of a potential reversal or continuation. The next downside support is seen at 58,803 & 54,680, while key resistance is defined at 63,969.