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With the bulk of world indices now officially in bear market territory (declines of 20% or more), many quantitative models kicking out U.S and Euro-area recession probability of between 10 and 60%, and all the recent volatility on the JSE, locals may be forgiven for feeling shell-shocked.

And yet, the JSE has staged an unbelievably remarkable performance in these uncertain times. The table below shows about 20 indexes around the world and how far they have fallen from their highs since January 2011.  The JSE is at the top of the list with only a 9.2% decline as at 23rd September 2011:

 
*Note : Data as at 23rd September 2011

We have highlighted resource-intensive markets in green to offer comparison to similar markets to the JSE. It is amazing that strong economies with healthy resource sectors such as Australia (mining), Canada (energy, mining), Norway and Sweden (oil) are trading well below the JSE during this period. Many locals do not realise that these resource-related markets, including the JSE, are actually the top-performing stock markets worldwide over the last two decades. The US has also shown remarkable resilience to the rest of the world during this period, not yet in bear market territory. 

The large foreign yield-seeking inflows into SA bonds (strong rand) and equities have obviously shielded the JSE from the worst of the global rout.

It is interesting at this point to review the strongest performing large-cap (> R10Bn) JSE equities since January 2011. They are CCO (+46%), BTI (+32%), WHL (+31%), EXX (+30%), LHC (+25%), HAR (+25%), TFGP (+20%), MNP (+15%), GFI (+15%), VOD (+14%), ANG (+13%), MDC (+12%) and SHP (+12%). Lots of retailers and gold counters. 

It is interesting that the retail sector has borne the brunt of the recent JSE sell-off (mostly foreigners dumping in risk-off trades), whilst the technology sector seems to have gained the most since the 8th August bottom (flagged by the vertical orange line below).

 
The JSE is however approaching an important bottom, or “Great Trough” as we like to call it. The Fosback Trough Detection indicator has reached the all-important 30 mark and our subscribers are on standby for a rare BUY-ON-THE-DIP signal with very respectable accuracy. We covered the operation of this indicator in a May 2011 MarketViews posting, if you are interested in reading about it. Our last signal was on 11 Aug 2011, some 2 days after ground-zero on the last great trough.

To keep abreast of the markets, you can subscribe for a very reasonable R454 per month here: http://www.sharenet.co.za/v3/products/powerstocks/ 

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