JSE Relative Sector Ratings: Here's What's Leading/Lagging

Research Notes For 23 to 27 June > https://www.unum.capital/post/r2327june

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Key:

• Strong: Indicates outperformance relative to the Top 40 Index.

• Weak: Indicates underperformance relative to the Top 40 Index.

• Neutral: Indicates performance in line with the Top 40 Index.

• Overbought: High demand; suggests the sector might be due for a pullback.

• Oversold: Low demand; suggests the sector might be due for a bounce.

• High Bullish Momentum: Strong upward price movement.

• High Bearish Momentum: Strong downward price movement.

JSE Sector Preference Ranking

1. Chemicals: Strongest reading. Shows dramatic short-term improvement from a weak long-term base.

2. Banks: Second strongest. Shows significant positive momentum emerging in the short term.

3. Technology: Neutral reading, but from a strong long-term base. Shows recent deterioration.

4. Gold Miners: Neutral reading, but from a strong long-term base. Shows recent deterioration.

5. Telecoms: Neutral reading, but from a strong long-term base. Shows recent deterioration.

6. Insurers: Consistently neutral. Performing in line with the market.

7. Platinum Miners: Consistently neutral. Performing in line with the market.

8. Consumer Staples: Showing signs of stabilization from a weak long-term trend.

9. Hospitals: Showing signs of stabilization from a weak long-term trend.

10. Paper & Pulp: Showing notable stabilization from long-term bearish momentum.

11. Luxury Goods: Deteriorating from a neutral base into short-term weakness.

12. Consumer Discretionary: The weakest sector, showing consistent underperformance.

13. Coal Miners: Showing stabilization, but from a very weak long-term base.

14. Healthcare: Weak across short and medium terms, with very low long-term demand.

15. Miners: Weakest reading. Although slightly improved, remains in a clear downtrend.

    

Detailed Sector Analysis

1. Chemicals vs Top 40

• Short Term: Strong

• Medium Term: High Bullish Momentum / Approaching Overbought

• Long Term: Weak

• Insight: The most bullish sector, showing a dramatic turnaround. The shift from a Weak long-term base to High Bullish Momentum and now Strong short-term outperformance signals a powerful new emerging trend.

2. Banks vs Top 40

• Short Term: Strong

• Medium Term: Neutral

• Long Term: Neutral

• Insight: Significant short-term improvement. The move from a Neutral long-term base to Strong short-term performance indicates a powerful surge in positive momentum.

3. Technology vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Strong

• Insight: Deterioration from long-term strength. The move from Strong to Neutral suggests a pause or consolidation after a period of leadership.

4. Gold Miners vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Strong

• Insight: Similar to Technology, this sector shows a deterioration from long-term outperformance to a more neutral short-term stance.

5. Telecoms vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Strong

• Insight: Another sector showing a deterioration from its long-term strength, now performing in line with the market in the short term.

6. Insurers vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Neutral

• Insight: Consistently neutral across all timeframes, indicating performance that is perfectly in line with the broader market.

7. Platinum Miners vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Neutral

• Insight: A completely neutral profile, suggesting this sector is moving in lockstep with the Top 40 index without showing relative strength or weakness.

8. Consumer Staples vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Weak

• Insight: Short-term improvement. The move from a Weak long-term base to Neutral suggests that recent underperformance is stabilizing.

9. Hospitals vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: Weak

• Insight: Similar to Staples, this sector is showing short-term stabilization from a weak long-term trend.

10. Paper & Pulp vs Top 40

• Short Term: Neutral

• Medium Term: Neutral

• Long Term: High Bearish Momentum / Approaching Oversold

• Insight: A notable short-term improvement. The move from a long-term bearish momentum state to Neutral suggests the intense downward pressure has subsided for now.

11. Luxury Goods vs Top 40

• Short Term: Weak

• Medium Term: Weak

• Long Term: Neutral

• Insight: This sector shows marked deterioration from its neutral long-term stance into clear weakness on shorter timeframes.

12. Consumer Discretionary vs Top 40

• Short Term: Weak

• Medium Term: Weak

• Long Term: Weak

• Insight: The weakest sector. Consistent underperformance across all timeframes confirms a deeply entrenched downtrend.

13. Coal Miners vs Top 40

• Short Term: Neutral

• Medium Term: High Bearish Momentum / Approaching Oversold

• Long Term: High Bearish Momentum / Approaching Oversold

• Insight: A notable improvement from medium-term bearish momentum to a neutral short-term stance, suggesting the aggressive underperformance has paused.

14. Healthcare vs Top 40

• Short Term: Weak

• Medium Term: Weak

• Long Term: Oversold

• Insight: This defensive sector is showing consistent weakness. The move from a long-term oversold state to weak short-term performance suggests no recovery yet.

15. Miners vs Top 40

• Short Term: Weak

• Medium Term: High Bearish Momentum / Approaching Oversold

• Long Term: Oversold

• Insight: Slight short-term improvement from bearish momentum, but the overall picture remains negative. The long-term oversold status suggests very low demand.

Lester Davids

Senior Investment Analyst: Unum Capital