Sunday, May 09, 2010

JSE: Index could soon drop to 25 000

SHOOT: After the rigours of the past 18 months, the JSE and other world markets had no business to expand the way they have. Massive amounts of credit were wiped out of the financial system during the subprime crisis. Printing that money back into existence is difference to real wealth. There's a lot of unwinding and unravelling of these fictions ahead of us. The JSE bottomed out at 18 000 not long ago, it needs to settle back to a level approaching that to have any semblance of accurately reflecting the value of the market. Sorry for you.
clipped from www.fin24.com

The JSE’s all-share index looks set to lose another 10% if global markets don’t bounce back in the coming days.

He says there was a shift in investment sentiment and that fear currently has the upper hand, which means that more losses are ahead.

The all-share index dropped 1 000 points (3.6%) to 26 515 on Friday. The index lost 2 000 points over the past week.

Debt problems in Greece, which could spread to other European countries, have sparked fears that the world is facing another financial crisis.

The news from China, a key market for South African commodities, is downbeat. China is already in a bear market, with shares falling more than 20%.

Analysts have been warning for some time that the local market was ready for a correction.

The local market also looks expensive, with a price earnings ratio of 18 times. The market’s average P/E over the past fifty years was 12.

The Greek crisis provided the catalyst for a correction.

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