JSE all share drops 1.29%

• All-share index loses ground in tandem with European and Asian markets on expectations that Federal Reserve will become hawkish

The JSE all share dropped sharply on Tuesday for the eighth successive session, as global markets continued to reel from expectations that the Federal Reserve will aggressively tighten monetary policy in coming months. The all share closed 1.29% lower at 56,377.20.

The JSE all share dropped sharply on Tuesday for the eighth successive session, as global markets continued to reel on expectations that the US Federal Reserve will aggressively tighten monetary policy in coming months.

The all share closed 1.29% lower at 56,377.20, extending losses in 2018 to 5.26%.

The Dow opened 1.53% lower at the JSE’s close, before recovering in volatile trade, following sharp retreats in European and Asian markets on the day.

The Dow was down 1,600 points at one point on Monday in frantic trade, reminiscent of the “taper tantrum” of mid-2013.

It was the worst one-day retreat recorded.

“The sudden declines in equity markets over the last couple of sessions is attributed to higher interest rate expectations,” said Oanda analyst Craig Erlam.

“But this appears to have been exacerbated by a combination of automated trading and panic selling.”

The sell-off started on Friday, after US jobs data came in stronger than expected. This led to a sharp spike in bond yields and a stronger dollar as speculation mounted that the Fed would hike rates four or even five times in 2018, from the expected three times.

Low bond yields have supported a bull market in equities over the past decade, gaining further traction from US President Donald Trump’s recent tax cuts and continued upbeat economic data.

“As bond yields rise, equities could in turn become somewhat less attractive,” said Old Mutual Multi-Managers investment manager Dave Mohr. However, since bond yields were rising for “good reasons” in a strong US economy, this should not lead to heavy equity losses, he said.

Analysts emphasised it would not make sense to jump out of the market now. At the same time there is little place to hide amid broad-based losses. There could be little safety in the local bond market, even though yields are relatively attractive at higher than US yields.

Fixed interest rate deposits may be affected if the Reserve Bank reduces rates.

Stanlib retail investment director Paul Hansen said it appeared as if a global stock market correction might have begun. “It is way overdue and should lead to renewed buying opportunities,” he said.

After rising 71.34% in 2017, market heavyweight Naspers has lost 10% so far in 2018.

The group has been hit by headwinds, notably at subsidiary MultiChoice following the payments to the Guptalinked ANN7. It has also requested Investec to withdraw an analyst report that it says contained factual errors. According to the report, Naspers should trade at a discount to net asset value due to the issuance of shares over the past few years, which have diluted shareholder value.

Some investors have been calling for the group to unbundle its stake in China’s Tencent.