Broad-based rout in JSE after Moody’s warning and Naspers’s slump

The JSE suffered its worst daily percentage fall in 2018 on Wednesday as the local market retreated more than 3%, dragged down by a sharp fall in Naspers and plummeting mining stocks.

This followed a negative update from ratings agency Moody’s about the government’s finances, together with weak retail sales data in June, making it likely that the economy went into a technical recession in the first half of 2018.

Moody’s expects the fiscal deficit to weaken to about 4% of GDP in the year to the end of March 2019. That compares with the state’s February budget forecast for a 3.6% deficit.

ANC chair Gwede Mantashe’s comments added to further nervousness: he said the Constitution needed to be amended to limit land ownership to 12,000ha per farm owner, and that white farmers who owned more than that should hand over the rest to the state without compensation.

Mining stocks were pummelled by a firmer dollar, with the euro weakening to an annual low of $1.1301, as well as by lower oil prices. Brent crude shed 1.3% to $71.24 a barrel.

Annual growth in retail sales fell to 0.7% in June, against the markets’ forecast for slightly faster growth of 2% from 1.9% in May.

Capital Economics analysts said it was possible that SA entered a technical recession last quarter. “A weak performance from key sectors has dealt a blow to hopes that President Cyril Ramaphosa would boost growth.”

Market heavyweight Naspers set the tone for a negative day, trading in weaker territory even before the release of Chinese internet group Tencent’s second quarter numbers.

After trading 3% lower at the opening, Naspers, which owns 31% of Tencent, extended losses to a whopping 10% after the actual release of the actual Tencent numbers as Tencent remains the main driver of the group’s market value.

Tencent’s gaming businesses were hit by the Chinese authorities freezing approval of new game licences, which saw Tencent lose revenue on the country’s second most popular game in June by time spent.

Analysts expect that Naspers’s numbers will be hard hit by the fact that Tencent did not declare a quarterly dividend. Others were more hopeful.

“The market clearly overreacted as Tencent’s normalised numbers were still very strong,” said Capicraft Investment Partners analyst Drikus Combrinck.

Combrinck said chances are it was just a seasonal dip for Tencent, based on lesser exposure to gaming on Chinese smart phones, and that the group would recover later in the year.

Naspers closed 8.22% lower at R3,060.88 and is 11.3% down in 2018.

The Dow was 1.19% lower at the JSE’s close amid data reflecting strong retail numbers, raising fears of an overheating US economy.

US retail trade rose by 0.5% month on month in July, following a downwardly revised 0.2% advance in June. The sales beat market expectations of a 0.1% rise.

European markets were lower as investors continued to worry about the effect of Turkey’s currency crisis on banks. The DAX 30 shed 1.82%.

The all share closed 3.41% lower at 55,646.20 points and the top 40 lost 3.76%. The gold index shed 7.9%, platinums 4.38%, industrials 3.8%, resources 3.67%, banks 3.34%, financials 2.23% and general retailers 1.35%.

Anglo American plunged 6.02% to R280.48 and BHP 3.71% to R297.97.

Sasol fell 2.22% to R512.

Gold Fields shed 10.85% to R37.30. Bank of America Merrill Lynch questioned the group’s continued commitment to its South Deep mine, which earlier announced losses of R100m, despite numerous failed restructuring plans.

Sibanye-Stillwater lost 8.52% to R7.52.

FirstRand dropped 4.75% to R62.20 and Standard Bank 2.64% to R184.25.

Redefine slipped 0.39% to R10.34 and Nepi Rockcastle 1.22% to R121.66.

Vodacom fell 3.51% to R123.57.

Curro gained 2.7% to R32.30.