JSE nears worst monthly performance in 10 years

The JSE is headed for its worst monthly performance in about a decade, raising fears that the downside momentum will continue. The current post-crisis wobbles in global markets have seen, for the first time in a long time, almost every major asset class falling into negative territory for the year.

In the US in October, even high-flying technology stocks have been pummelled, and last week the last of the S&P 500’s advance evaporated and left investors facing a sea of red.

The third-quarter results of Amazon and Alphabet last week reignited the sell-off.

The S&P 500 fell 3% or more only twice in 2012-17, but has done so four times in 2018 and twice in October. Analysts and investors insist they are not panicking yet. While October has been a bad month, a calm stretch had preceded it. The US stock market has historically averaged more than four falls of 5% a year, and suffers a 10% correction about once a year.

Hong Kong’s Hang Seng and China’s Shanghai Composite are also down more than 20% from their peaks.

Old Mutual Multi-Managers analysts Dave Mohr and Izak Odendaal said the best time to buy was when pessimism was at its highest. The opposite was also true, however, they said, implying that caution had to be exercised when the economy was doing well.

The all share index was on the cusp of bear market territory, after sliding to a 15-month low last week. The bear market is loosely defined as a drop of 20% or more from the peak, but some regard this threshold as simply psychological. Nearly 30 of the top 40 stocks listed on the local share market are in bearmarket territory already, from banks to retailers, health-care, food and property companies, to name but a few sectors.

Sentiment towards mediumsized companies by market value has been just as negative, partly reflecting SA’s poor economic growth prospects.

The Public Investment Corporation (PIC) is probably feeling the sting of the downturn most, as its listed investments make up 12.5% of the market value of the JSE, which was R13.4-trillion a week ago. With R2-trillion worth of assets under management, the PIC invests on behalf of state employees and other statutory funds.

Since the start of October, the all share was down 8.74%, according to Iress data, putting it on track for its worst monthly performance since the global financial crisis in 2009.

A cocktail of factors have converged to knock the JSE, which is largely dominated by stocks of companies that make most of their money outside of SA.

“Tech companies have raised the bar so high in recent years that the numbers reported by Amazon and Alphabet just weren’t quite spectacular enough, not at a time when investors are a nervous wreck and fleeing for safety at the first sign of danger,” said Oanda senior market analyst Craig Erlam.

Apple, the maker of iPhones and iPads, releases its quarterly results on Wednesday.

With a market value of about $1-trillion, Apple is the world’s most valuable company and has contributed immensely to the US stock market rally over the past decade.

In SA, Naspers shares will be closely monitored this week.

The media and internet company has become the proxy of the market because it makes up nearly a fifth of the all share.

Naspers has felt collateral damage due to its 31% interest in

30 the number of top 40 stocks listed on the local share market that are already in bear market territory