JSE nears worst monthly performance in 10 years

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 bear-market territory already, from banks to retailers, health-care, food and property companies, to name but a few sectors.

Sentiment towards medium-sized 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 Tencent, the Chinese technology company. Tencent is feeling the squeeze of concerns about the slowdown in the Chinese economy, which analysts  partly attribute to a tit-for-tat tariff spat between Beijing and Washington.

The prospect of more interest rate increases from the US Federal Reserve has weighed on global markets.

The Fed has hiked rates three times in 2018 and another hike is expected in December.

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