The JSE on Thursday suffered its worst loss since April 17 2000 — the bursting of the internet bubble — when a surprise rate hike locally saw the stuffing knocked out of a market that was already sagging under the weight of weaker world markets and lower commodity prices.
The all-share index closed well below the 19 000-mark just two days after breaking below 20 000 and was down 16,7% since peaking on May 11.
The all-share index ended 6,48% lower at 18 414,69. It was its lowest close since January 18. Resources dropped 6,78%, the gold-mining index slid 5,99% and the platinum-mining index plummeted 7,71%. Industrials weakened 5,99%, while the financial and banks indices slumped 6,69% and 6,54% respectively.
The rand was bid at R6,79 per dollar from R6,73 when the JSE closed on Wednesday, while gold was quoted at $613,45 a troy ounce from $620,63/oz at the JSE’s last close.
On the all-share index, 145 shares were down, 12 were unchanged and only three were up. The entire Top 40 index was down, with the best performer SABMiller losing 3,6% to R115.
South African Reserve Bank Governor Tito Mboweni announced a 50-basis-point increase in the repo rate to 7,5% on Thursday afternoon. Only one of the 14 economists polled by I-Net Bridge last week had expected a hike — and of 25 basis points.
“We were down in line with global markets on fears that US [United States] rate hikes would lead to a slowing of the world economy. This translated to lower commodity prices so we were hit by a double whammy,” a dealer said. “We already had to handle that and then we got an unexpected rate hike as well. It was a lot for the market to digest.”
He explained that players had not factored in an interest-rate increase immediately. Now they have to go back to the drawing board and ask whether it was a one-off increase or if there are more in the pipeline.
“I thought we would have a 10% to 12% correction, but now we are overshooting it. I think that is simply because we had to face rising rates as well,” he commented.
The dealer said that basket selling by futures players had amplified the JSE’s losses.
“This is a gap move. What it does is immediately catch the futures market short of margin. They’ve either got to instantly find margin or close their margin by closing their position. This exacerbated the fall because they had to sell as well.”
A feature on the downside was Swiss-listed luxury-goods group Richemont, which nosedived 10,82% or R3,45 to R28,45. Richemont reported its results for the year to March 31 before the opening.
“Richemont’s results were superb. The only reason it took a smack was its uncertain outlook,” the dealer asserted.
London-listed diversified resources group Anglo American slid 6,21% or R15,22 to R230 and BHP Billiton slumped 6,94% or R8,57 to R115.
Petrochemicals group Sasol surrendered 7,64% or R18,19 to R220,01, while coal and iron-ore miner Kumba plunged 10,11% or R10,72 to R95,27.
Gold Fields fell 7,21% or R9,17 to R118 and was the worst performer among gold miners. Impala Platinum dropped 8,26% or R90 to R1 000.
Brand-management group Barloworld took an 8,44% or R9,50 knock to close at R103 and services group Bidvest shed 7,33% or R7,20 to R91.
Cellular network operator MTN group retreated 5,5% or R2,92 to R50,18, while Telkom tumbled 6,25% or R8,25 to R123,75.
Furniture group Steinhoff fell 7,08% or R1,60 to R21, while retailer JD Group gave up 7,59% or R5,50 to R67.
Leading financials lower, London-listed Old Mutual lost 7,78% or R1,57 to R18,60. Liberty Group was 7,69% or R5,75 lower at R69.
Specialist bank Investec plc sank 10,45% or R35 to R300.
Absa slid 7,06% or R7,29 to R96,01, Standard Bank slumped 6,87% or R5,20 to R70,50, FirstRand fell 5,81% or one rand to R16,20 and Nedbank weakened 5,13% or six rand to R111.
Construction group Murray & Roberts led the market’s upside, jumping 3,99% or 85 cents to R22,15 — but only because it was down more than 12% on Wednesday when it was sold off in the closing auction.
Futures bloodbath
South African near-dated futures felt significant pain after the rates announcement on Thursday, with the Alsi Top 40 Index ending at 16 682 from a previous close of 17 848. This meant the index was down a massive 1 166 points.
The June near-dated industrial futures (Indis) didn’t end the day unscathed, ending down 493 points at 12 942.
“It was a bloodbath today and this behaviour is very unusual. It is not characteristic of a bull market,” said Gerhard Olivier, head trader for Cortex Securities in Cape Town. “We have been catapulted from a bull market to a bear in two days and this switch from a bull to a bear has taken many investors by surprise.”
He posed the question that with the market so oversold, who would buy now? “If the whole world is tanking, then it’s an international phenomenon. For instance, Norway was down 5% as well and our move was not abnormal in the context of the world. You could call it an international crash,” said Olivier.
“I thought gold might move stronger, but it also suffered. I think we will only come up once the international scene changes, and the Dow is not looking good at the moment,” he concluded.
A Safex official said a total of 88 381 Alsi contracts traded on the day, compared with 70 538 Alsis on Wednesday. He said 93 Indi contracts traded on the day from nil the day before. — I-Net Bridge