Outlook for March not good
The all-share index ended last week 2.92% lower to record its worst weekly performance in two months
If current trends continue, March is set to be the worst monthly performance for the JSE since June 2017.
If current trends continue, March is set to be the worst monthly performance for the JSE since June 2017.
The all share is down 3.29% so far in the month, surpassing February’s loss of 1.98%, which was in response to market concerns that US equities were overheating. The market recovery since then has been fragile.
The all share ended the week 2.92% lower, the worst weekly performance in two months. Overall, the all share is down 5.21% in 2018. It lost 4.77% in the first week of February as investor concern grew over whether US President Donald Trump’s tax cuts could force the Federal Reserve to raise interest rates. Since then, the Fed has indicated it will remain circumspect. However, worries over a possible trade war between China and the US have encouraged risk-off trade.
The Dow on Friday was set to record the poorest weekly performance since early February.
“Trump’s tariff plans have created uncertainty and put global stock markets under pressure,” said deVere Group analyst Nigel Green.
Trump slapped up to $60bn in tariffs on annual Chinese imports on Thursday. China reacted shortly thereafter, imposing levies of $3bn on 128 US products.
March has been a difficult month for the big local stocks. Naspers is heading for the fourth consecutive month of losses, worsened by a global tech slump in the aftermath of the Facebook data scandal.
British American Tobacco has lost 20.8% so far in 2018, while the rout in the property sector showed few signs of abating. Benchmark Growthpoint has been the latest casualty. The blue-chip company dropped more than 5% on Friday after Investec Bank said it intended buying back its Sandton head office from Growthpoint for R2.2bn.
The property index has lost 21% in 2018. The sector has also been hammered by an expected rise in bond yields, as well as central and eastern European markets retreating.
Local property stocks with exposure to the region have been affected. This includes Nepi Rockcastle, which has shed 40% in 2018.
Banks remain positive, with the index up 5.3% in 2018, mainly thanks to the recovery in Standard Bank. The company’s share price has gained 12% in 2018, outperforming rival FirstRand, which is up 2.23%.
At an average price-to-earnings ratio of 18, the All Share does not look like a bargain yet.
Franklin Templeton analysts said in a note that present valuations needed to be justified by upbeat results, but economic fundamentals in emerging markets remained sound.
The South African market’s performance has in fact been better than its emerging market peers following the swearing-in of President Cyril Ramaphosa, Franklin Templeton said.
Investors are grappling with the question of whether markets are not at a peak and if the news can get any better from here, said Stanlib retail investment director Paul Hansen.
He said the view on company earnings was positive. “So the bull market can continue to move ahead as earnings continue to grow,” he added.