Rising interest rates have everyone and his partner hot and bothered under the collar, and it seems it’s not over yet, not by a long shot!
The South African Reserve Bank (SARB) raised interest rates by 75 basis points to lower headline inflation to its target range of 4.5%. The current CPI for October came in at 7.6%, which means we could see further rate hikes well into the second quarter of 2023.
Luckily all is not lost as certain financial market sectors perform well during these economic cycles, which turns our attention to the JSE Financial sector and, specifically, Banking.
4 JSE Banks Investors and Traders should take note of:
Absa Group Limited (JSE: ABG)
The “Big 4 Banks” have been topical of late, which has seen the likes of Absa off to the races reaching new highs after the interest rate announcement.
Technicals
The price action on ABG reached new highs last seen in 2018, acting as significant resistance to higher prices. The major resistance around the 21006c level could give short-term traders an opportunity down lower to the 19065c support level. This could also potentially give long-term investors a better entry point as the SARB rate cycle continues.
FirstRand Limited (JSE: FSR)
One bank that has seen an upward trajectory in share price momentum at the start of the year was FirstRand Limited. The integrated financial services business has seen its share price reach all-time highs in March this year and could be poised for another move.
Technicals
If the price action can find support and break out of the descending channel, we could possibly see more upside back to the resistance zone of 7191c, which should see investors smiling. If the channel breakout does not occur on increased volume levels, we could expect the price to move lower to the 50-day simple moving average (blue line) and even lower. The primary support level for the bear case would be the 5980c a share support level.
Nedbank Group Limited (JSE: NED)
Nedbank’s share price has been subdued over the year but has been in a steady uptrend since the COVID-19 pandemic lows, which has seen no complaints from investors.
Technicals The price action has broken out of the downward slope with little volume to support the higher move and is still far from reaching new highs. Underperforming fundamental factors could be curbing the price action from moving higher. The price action consolidates above the triangle breakout, which could see the bears get on board in the short term. The price action needs to stay above the 21206c support level to negate a negative outlook.
Standard Bank Group Limited (JSE: SBK)
The higher interest rate environment has been boasting well for Africa’s largest lender, Standard Bank, as was seen in its latest earnings report. The price action rallied from the uptrend support line after the positive earnings announcement for the first nine months of 2022.
Technicals
The price action on SBK looks like that of Nedbank; we have a triangle breakout, volume is low, and we could see a retest of the breakout zone, which could attract short sellers. Investors and traders alike could see the price action move higher to the next resistance point around 18772c, last seen in March. The triangle breakout could be tested for the bear case before we see higher prices.
*Take note: All charts are on a weekly time frame to look at the bigger picture.
Sources: Absa Group Limited, FirstRand Limited, Nedbank Group Limited, Standard Bank Group Limited, TradingView.
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