/ 21 January 2008

JSE follows battered world markets lower

A sharp decline in global equity markets driven by fears of a global economic slowdown and a United States recession has led to a big sell-off on the JSE on Monday.

By noon, the JSE’s broader all-share index had lost 3,32% to 25 768,400 points. The platinum mining index was down 4,76%, while resources dropped 3,91% and the gold mining index fell 3,3%. Financials were off 3,09% and banks gave up 2,75%, while industrials declined 2,66%.

The rand was bid at 7,15 to the US dollar from 7,06 when the JSE closed on Friday, while gold was quoted at $873,38 a troy ounce from $882,35/oz at the JSE’s last close.

Overseas, the UK’s FTSE 100 was down 2,23%, Asia’s Hang Seng fell 5,49% and its Nikkei pulled back 3,86%.

“The JSE has come back to levels of where it was at about a year ago, the market has been thrown into a panic, and support levels have been broken through in the US market as well as on the JSE. What is concerning though is that we haven’t responded to the packages coming out of the US, like the fiscal stimulus package, and the chances that we may see a dramatic cut in interest rates in the US,” said a Johannesburg-based equities trader.

“One thing that has kept me in this market is that when the JSE fell, it didn’t fall from a ridiculously high rate, and I don’t think that the world economy is going into a depression, but the market has begun to panic and it is throwing away everything,” he said.

He added that it was a bit peculiar to see such a brutal sell off, but he explained that more sub-prime concerns had shaken markets.

“Central banks have tried to come to assist economies, and something has to catch on later. We have gotten to levels where we should be saying ‘hold on, this isn’t actually that bad'”, he said.

“But our local situation has depressed us as well, we have been caught by the overseas front as well as our own problems here in South Africa. Local investors are being squeezed by the deteriorating sentiment here as the lack of power [electricity] has created concern about the economy’s ability to grow,” he explained.

“Last week, Eskom said that the local government mustn’t advertise for jobs until 2013 because we don’t have the power to meet the extra demand. It is not

only global issues that are hurting us, but it is also self-imposed through bad

management and bad planning,” he noted.

He added that other factors hurting investors were global worries about a US recession as well as a further hike in South African interest rates.

“Private clients are being squeezed and all those favourite stocks are just falling and no one can save them as no one is coming in to buy into this market. When foreigners lose their love affair, they just dump it,” he said.

The trader added that the rand was being slaughtered, which was helping mining stocks on the JSE. “Even though they are sharply lower, it could be worse,” he said.

Taking a look at stocks, by noon, resource group Anglo American slumped R15,05, or 4,08%, to R353,95, BHP Billiton retreated R7,69, or 4,01%, to R184 and Sasol decreased R8,30, or 2,54%, to R318,70.

Among gold counters, AngloGold Ashanti weakened R6,20, or 2%, to R303,90 and Goldfields slipped R5,90, or 5,11%, to R109,60.

Platinum miner Anglo Platinum dipped R38, or 3,6%, to R1 017 and Impala Platinum slumped R15,01, or 5,89%, to R239,99.

Building and construction group Basil Read tumbled R2,50, or 8,62%, to R26,50 and Raubex Group lost R2,95, or 7,03%, to R39.

Diversified industrials group Barloworld fell R4,31, or 4,82%, to R85,19 and brewer SABMiller gave up R3,30, or 2,01%, to R160,69.

Retail group Lewis on Monday said that its revenue growth for the quarter ending on January 5 2008 increased by 8% with the cumulative revenue growth for the nine months ending on January 5 increasing by 10%. Its share was down R2,54

rand, or 5,98%, to R39,96.

Elsewhere, investment banker Sasfin dropped R5, or 10,42%, to R43 and life assurance group Old Mutual was off 93 cents, or 4,74%, to R18,67 – I-Net Bridge