In order to avoid watching any cricket on TV, I tried my hand at old-fashioned analysis this week and spent time sorting out the new family of indices that the JSE presented to us at the start of the year. I am delighted to see the back of those dreadful cyclical / non-cyclical labels. It used to get me thinking about the Argus bike race versus the Two Oceans marathon.
Are you aware that of the roughly 400 listed (more or less) ordinary shares, just 161 of them contribute to the All Share Index? This in turn is split into a Top 40 (containing 41 shares!), the Mid Cap (63 shares) and the Small Cap (57 shares). A different subdivision splits the 161 shares into nine Economic Groups and then again into about 45 sectors. Many of these groups and sectors are rather silly. The Oil & Gas Group contains just Sasol. MTN and Telkom are the sole occupants of the Telecomms Group and then each of these shares is the only member of its own Sector (Mobile and Fixed Line). The Health Group is also thin and sickly, with just three shares, also further split between two Sectors. Don’t complain, we are now in line with international standards.
Some 115 shares that to make the cut for the All Share Index, are lumped into the cutely named Fledgling Index. However, the total market capitalisation of this whole batch is less than that of Barloworld. The JSE recognises the triviality of this Index by computing its value just once a day, after the close. The conclusion is that unless you are a derivatives trader interested in some of the special indices such as the Findi30 or the Indi25, pretty well the only indices worth watching regularly are the All Share or its slimmer twin, the Top 40 (which drives SATRIX), the Gold Mining index (for gold bugs) and perhaps the Banks index. Thereafter one should probably just follow the shares themselves. After all, that’s mostly what you can buy.
This has been one of the least volatile weeks in a long time. Although the All Share Index achieved a new high at mid-week, the daily ranges of this parameter have been smaller than we have become used to. Is this the eye of the hurricane? When the daily ranges surge up towards 200 points again, will the wind be blowing in the other direction? Should we be battening down the hatches?
Patient readers may recall the results of a straw poll taken amongst my colleagues several months ago. The question was simple. Will the rand / dollar exchange rate next break above 7 or below 6? Not one of us voted for the lower number. But this week we saw that exchange rate proudly wearing a 5 big figure. As usual, the advice was worth its price! It has been an interesting week in the forex markets, with both the Euro and the Swiss franc losing ground to the dollar, pound, yen and of course, the rand – that king of currencies. A front-page picture in Business Day made me wonder if the dollar had finally begun to experience the difficulties that many of us have so long been expecting. It showed a wad of US dollar notes all printed back to front. I presume that hoisting one’s flag upside down is still an international distress signal?
All the lads with houses along the Vaal have been considering distress signals as the flooding river rises higher. The rest of us a very pleased with all the rain, but it must stop by next weekend please when I go off on holiday.
James Greener
13th January 2006
