JSE set for lower opening as Tencent retreats further

It is mixed screens from Asia this morning with the JSE set to open lower as Tencent, which influences the JSE via Naspers, took a hit from the US implementing new export controls against China.

The Shanghai composite in mainland China is up 0.40%, while the Hang Seng in Hong Kong retreated by 1.56% and the Nikkei in Japan by 2.61%. Year to date the Hang Seng is down by more than a quarter (27.18%), the Shanghai composite 17.79% and the Nikkei 9.90%.

Tencent fell by 3.03% on Tuesday morning and has plunged by 43.63% so far this year.

The Hang Seng reached a more than a decade low as it tumbled further on the back of new Covid-19 cases in mainland China and concerns about new US export control measures against China, including trying to restrict access of the world’s second largest economy to semiconductors.

The Shanghai composite increased despite Chinese investors being concerned that the government could implement new Covid-19 lockdowns again ahead of the Chinese Communist Party’s 20th national congress as the number of new cases rose.

The Nikkei tracked global markets after the public holiday in Japan on Monday as investors expect the US Federal Reserve to raise interest rates by 75 basis points following new economic data from the world’s largest economy on Friday.

Market sentiment is also being hampered by heightened geopolitical tensions, especially by the war in Ukraine after Russia attacked the capital Kyiv on Monday after the bombing of a bridge which connects Russia and Crimea.

“The new week has begun where last week left off, with higher global rates, weaker equity markets and a stronger dollar,” Bank of New Zealand senior market strategist Jason Wong wrote in a note on Tuesday.

In US markets, the Nasdaq ended 1.04% lower on Monday, followed by the S&P 500 retreating by 0.75% and the Dow Jones dropping by 0.32%. The Nasdaq is down over a third so far this year (33.42%), the S&P 500 nearly a quarter (24.69%) and the Dow Jones more than a fifth (20.18%).

The JSE closed weaker in line with global peers on Monday, with investors setting their sights on this week’s US inflation report and key company earnings to further assess the strength of the economy and the Federal Reserve’s next move.

The JSE all share index lost 1.38% to 64,769 points and the top 40 index shed 1.51%. The precious metals and mining index fell 3.36%, resources were off 2.14%, industrials eased 1.71% and industrial metals retreated 1.25%. Since the start of the year, the all share index has receded by 12.13%.

The dollar remains rampant against the rand, gaining another 0.32%, trading at R18.16. The greenback has gained 13.82% against the rand so far this year.

On the commodities front, the price of Brent crude, gold and platinum prices all declined. Brent crude dipped by 0.33% to $95.88 a barrel, gold 0.24% to $1,663.99/oz and platinum 0.58 to $893.23. So far this year, Brent crude has gained 14.87%, gold diminished by 5.46% and platinum ebbed by 11.32%.

The only corporate news expected on Tuesday is fourth-quarter production figures from chrome and platinum group metals miner Tharisa.

Tuesday is set to be busier on the economics front with Stats SA publishing manufacturing and mining data for August at 1pm. The total manufacturing output was up by 3.7% year on year in July, compared with the same time in 2021 when unrest and looting in KwaZulu-Natal and some parts of Gauteng hobbled production.

Stanlib chief economist Kevin Lings said the positive annual growth rate was “heavily distorted” and mainly reflected the low base established in 2021 because of the riots.

“Consequently, the annual rate of change is currently not a good indication of the underlying performance within the manufacturing sector,” he said. “It is also clear that the loss of momentum during the past six months has been broad based, with large declines recorded in most manufacturing sectors since January 2022 including food and beverages, iron and steel, motor vehicles, rubber products, petroleum products, clothing, and paper.”

The IMF will release the World Economic Outlook report and the Global Financial Stability Report on Tuesday, which assesses the financial system and markets, addresses emerging-market financing in a global context and highlights systemic issues that could pose a risk to financial stability and sustained market access by emerging-market borrowers.

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