The JSE Top 40 Index is composed of companies that are listed on the Johannesburg Stock Exchange. It is one of two major stock indexes.
This article will show you how to invest in JSE Top 40 as well as how to trade the Index with CFDs. It will also identify companies to monitor, news flow, currency influences, and technical analysis for index trading.
Trading South Africa’s TOP 40 index: Tips and Tricks
The top companies and news can give South Africa 40 index traders a directional bias, but looking at shares of Naspers or BHP before the equity market opens (9am) can give traders a good indication of what to expect during the trade.
You should also be aware of other factors when trading JSE top 40; Watch out for movements in International Indices while trading the South Africa 40 Index
Many movements in our local Index will be influenced by major international indices such as the Dow Jones Industrial Average or the S&P500. The US and European equity markets remain open after the close of the South African market, but Asian markets are open much earlier than South African markets.
SA 40 Index traders might want to keep an eye on the global marketplace to get context and direction and gauge a general mood for the trading day.
How can the rand affect trading on JSE Top 40 Index?
The Top 40 Index shares include some that earn income in foreign currencies such as the US Dollar, British Pound, and Euro. If the Rand is weaker, companies will receive more South African currency when they repatriate funds to South Africa.
Rand hedge counters are shares that derive the majority of their earnings from foreign currencies. As a result, foreign currency is responsible for more than 65% of the earnings derived from the shares that make up the Index.
A weaker Rand could be considered a positive influence on the Index, as it would be a positive effect on earnings in shares that make up the Index. Conversely, a stronger Rand could be negative for these shares and the Index.
The Naspers, Richemont, and BHP are notable Rand hedgers.
Looking at the news flow to time the South Africa 40 Index trades
The news flow is crucial when trading this Index. News is sentiment, and this sentiment is often reflected by both retail and institutional investors.
High-impact news can have a significant impact on the price of an index’s stock price. This is why traders keep an eye on both the corporate and economic calendars when planning their trading day. Moreover, these catalysts can be predicted, so traders are able to react.
The gross domestic product, consumer price inflation, trade balance, interest rate announcements, and unemployment data are some of the key economic data points that traders should consider when trading the South Africa 40 Index. Traders have several options to access this data, including Bloombergs’s economic Calendar or plotting some of these events on their charts (if the trading platform allows it.)
It is important to consider major international economic data, especially from the US. Although traders may not have a deep understanding of the news releases, it is a common assumption that data that is more than expected is positive for the Index. Conversely, data that is below estimates would be negative.
Companies such as Anglo-American, Richemont, and BHP have high weightings in the Index and therefore are significant influencers of movement. Therefore, it is worth using this strategy: Staying on top of relevant news items, such as company results releases, will help you time your South Africa 40 index trades.
Technical Analysis for trading the JSE Top 40 Index
Technical analysis is an integral part of many index traders’ strategies. Technical analysis can be broad, but it is important to keep an eye on the key levels of support or resistance.
All traders, whether they trade using news-driven, technical, or fundamental information, will keep an eye on the price to determine levels of perceived value or levels at which trading prices may be considered too expensive.
Options traders will also be interested in key levels (support or resistance), which can trigger substantial buying or selling.
Key turning points below the current trading prices are where support levels are drawn, while resistance levels are drawn at turning points higher than the price. Traders often use support and resistance levels, stop loss, and buy levels to set targets.