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Johannesburg - The JSE posted steep losses on Thursday, with the benchmark index dropping more than 500 points as concerns over an overheating Chinese economy and downbeat US earnings reports dampened the market mood.
Even though the sell-off was broad-based, retailers fell the hardest as they are negatively affected by the sector rotation that is seeing investors switch funds from retailers to rand-hedge stocks, Kevin Algeo, portfolio manager at Imara SP Reid, said.
At 17:00 local time, the JSE all share index lost 1.63%, with resources 2.31% lower, gold miners slipping 1.07% and platinum miners falling 2.43%.
Financials lost 0.96%, banks declined 1.07% and industrials shed 1.25%.
The rand was trading at 7.06 to the dollar from 6.99 at the JSE's close on Wednesday. Gold was quoted at US$1 345.70 a troy ounce from $1 371.98/oz at the JSE's previous close, while platinum was at $1 801.50/oz from $1 841.50/oz before.
There was profit-taking in metals, hitting resources counters, but the weaker rand provided some buffer, Algeo said.
Algeo said the sell-off was mainly attributed to Chinese economic growth, which exceeded expectations, raising concerns about high inflation in China and the rest of Asia. This might prompt policy makers to tighten monetary policy quicker.
Some poor earnings reports from US companies, such as Goldman Sachs, also weighed on sentiment, he said.
The SA Reserve Bank's (Sarb's) interest rates decision did not seem to improve sentiment. The Monetary Policy Committee (MPC) on Thursday decided to leave the repo rate unchanged at 5.5% following its three-day meeting.
Interest rates remain at their lowest level in nominal terms in almost 30 years. The real interest rate also remains unchanged at below 1%. Rates were cut by 50 basis points to 5.5% for the repo rate in November and 9.0% for the prime rate.
Dow Jones Newswires reports that US stocks fell on Thursday on concerns that strong growth in China would lead to more tightening measures, although better-than-expected jobs data in the US helped limit the decline.
The Dow Jones Industrial Average declined 35 points, or 0.3%, to 11 791.
While China's strong performance reflects improving demand for Chinese goods in the US and elsewhere, it also adds to expectations that Beijing will feel the need to yank the reins back harder to fight inflation. That has worried global investors, who fear that Beijing might overcorrect and sap the strength of an economy that has accounted for a huge share of global growth in recent years.
However, the declines in US stocks were limited by data showing the number of US workers filing new claims for unemployment benefits fell by more than expected last week, pointing to slow improvement in the US jobs market.
Initial jobless claims fell by 37 000 to 404 000 in the week ended January 15, the Labour Department said on Thursday in its weekly report. The previous week's figures were revised to 441 000 from 445 000. Economists had expected last week's claims to drop by 25 000 to 420 000.
