Risk-off sentiment pulls JSE lower

The JSE all share index was sharply lower on Thursday, as risk-off sentiment drove banks and retailers down, while some rand hedges gained on a weaker currency.

The Reserve Bank’s decision to lower the repo rate by 25 basis points had little effect on the equity market as global risk-off sentiment overshadowed local news.

Retreating global tech stocks, amid concerns of increased regulatory oversight, placed global markets on the back foot. The rout gained traction as Facebook CEO and founder Mark Zuckerberg indicated he was planning to testify before the US Congress following an enormous user data breach and the Cambridge Analytica scandal.

The Dow was flat, in volatile trade, at the JSE’s close, with the DAX 30 having lost 0.54%. The all share fell 2.3% to 54,764 points and the top 40 2.59%. Banks dropped 2.91%, industrials 2.73%, financials 2.44% and general retailers 2.11%. The gold index added 1.18% and resources 0.33%.

Market heavyweight Naspers ended the day more than 6% lower, dropping below R3,000 a share for the first time since the beginning of February.

MMI Holdings shed 4.42% to R21.65 and Discovery 5.32% to R167.58. Sanlam plummeted 8.78% to R83.57. The group announced earlier that it had placed 65.5-million new ordinary shares with institutional investors at a price of R87 to raise R5.7bn.

Netcare leapt 7.21% to R26.92, after saying it was exiting the UK market.

The rand weakened following comments by Reserve Bank governor Lesetja Kganyago that the local currency was overvalued. It fell to R11.80 to the dollar, from R11.69 previously, but regained some of that to trade at R11.74 by the JSE’s close. The relative strength in the rand and local bonds over the past few months was testimony to receding political and economic concerns, analysts said.

“Investors view the rate cut as growth-positive for the economy, which has experienced disappointing GDP growth in recent years,” one said.

Local bonds were marginally weaker, with the R186 bid at 7.91% from 7.88%. The US 10-year bond was last seen at 2.7473% from 2.7764%.

The top 40 Alsi futures index fell 2.77% to 48‚613 points. The number of contracts traded was 30,719 from Tuesday’s 23‚172.