MARKET WRAP: JSE falls sharply in global risk-off trade

The JSE lost more than 2% on Wednesday to close at its lowest level in 2018  as global risk-off sentiment hammered rand-hedges and miners on global growth fears.

A number of blue-chip stocks were particularly hard hit, including Naspers, Mondi, Old Mutual and BHP.

At its annual meeting in Indonesia, the International Monetary Fund (IMF) said it expected emerging economies to resist recent market turbulence, but warned of an outside chance of a crisis. Argentina’s economy, for one, is expected to contract while Pakistan has also requested an IMF bailout, Dow Jones Newswires reported.

However, in what the IMF said would be a “severely adverse” scenario, capital flight could reach levels not seen since the 2008 crisis.

The all share closed 2.54% lower at 52,813.40 points, the lowest close for 2018, and the top 40 lost 2.8%. Industrials dropped 3.3%, resources 3%, food and drug retailers 1.87%, the gold index 1.63% and banks 1.08%. Platinums edged 0.27% higher.

Naspers plummeted 6.47% to R2,656.98, its worst performance in 2018.

Paper and packaging group Mondi Plc slumped 7.15% to R350.31. Mondi has been one of the best performers on the JSE so far in 2018, and is still up 9.7%, despite six consecutive negative sessions.

Old Mutual ended the day 26.85% lower at R21.55, mostly on technical issues as the group unbundled the majority of its shareholding in Nedbank.

BHP lost 3.24% to R306.76.

Sasol dropped 1.48% to R540.66,  while Brent crude fell 1.43% to $83.38 a barrel.

The Dow was 1.12% lower at the JSE’s close with European markets also sharply down on weaker Italian bonds amid developments around that country’s budget. Political parties have indicated that they could adopt looser fiscal policies in contravention of EU guidelines.

Global markets have been on edge since the US 10-year treasury yield rose above 3.2% last week. Investors have also been eyeing the potential effect of rising bond yields on market sentiment, Dow Jones Newswires reported.

Higher yields make riskier assets such as stocks less attractive. US stocks have been sold off in four of the past five sessions as investors fear interest-rate hikes in a low-inflation environment. 

The benchmark R186 government bond was last bid at 9.225% from 9.23% and the US 10-year at 3.2289% from 3.2051%.

The rand was off its best levels of the day, following the gains it made on the appointment of Tito Mboweni as finance minister. After firming to R14.5191 in intraday trade, it was at R14.6873 against the dollar at the JSE’s close, despite the euro clawing back some lost ground to $1.1525 from $1.4893.

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