The JSE could struggle to hold on to its record 75,000 points on Wednesday, with concerns over China’s property market and rising global bond yields offsetting optimism over the receding threat of Omicron.
The local bourse rose 1.8% and had its best day in almost a month on Tuesday, with global markets starting the year off on a positive note on the back of relief that Omicron does not appear to be threatening to overwhelm hospital systems.
However, Chinese equities remain under the shadow of the growing property sector headache, Swissquote senior analyst Ipek Ozkardeskaya said in a note on Tuesday.
US markets were mixed overnight, with analysts pointing to jitters around rising US bond yields, which can indicate the market is pricing in interest rate hikes. Bond yields move inversely to bond prices, and the prospect of higher interest rates makes current bonds seem less attractive.
Expectations of higher interest rates can also weigh on tech firms, reducing the relative value of their future earnings. The tech-heavy Nasdaq fell 1.33% on Tuesday, while the Dow Jones added 0.58%.
In morning trade on Wednesday the Shanghai Composite was down 0.81% and the Hang Seng 0.85%, while Japan’s Nikkei was flat.
Tencent, of which the Naspers stable is the single biggest shareholder, had lost 3.47%, amid some jitters in the market after it cut its stake in yet another tech firm. The Chinese tech giant cut its stake in Singapore’s Sea Ltd on Tuesday — selling $3bn of shares — sparking concerns of similar actions at other firms amid Beijing’s regulatory crackdown, Bloomberg reported.
A fire at the world’s most critical semiconductor machine manufacturer, Dutch company ASML, could be weighing on sentiment, Oanda senior market analyst Jeffrey Halley said in a note. There are concerns the fire at the facility in Germany could worsen a global semiconductor chip shortage.
Gold was flat at $1,814.66/oz, while platinum had fallen 0.28% to $969. Brent crude was 0.25% weaker at $79.96 a barrel.
The rand was 0.19% weaker at R16.04/$, having fallen 0.8% on Tuesday, when the yield on SA’s benchmark 10-year bond rose 8 basis points to 9.425%.
Local focus on Wednesday will likely be on the implications of the first part of the state capture commission report, which has made damning findings among a number of politicians and politically connected individuals.
The commission has also recommended the establishment of an independent anti-corruption agency as part of the measures to restore confidence in the state and combat the economic damage inflicted during misuse of state procurement.