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JSE down on negative sentiment

Johannesburg - World markets were mostly lower on Monday morning and the JSE was no exception, with almost all the indices on local markets softer by midday.

The negative sentiment was started on Friday by weakness on Wall Street, were all the major indices lost more than 1.5%, as investors are getting concerned about the state of the global economic outlook.

The fact that the US Federal Reserve decided not to raise US interest rates despite a stronger US economy brought home the realisation that its concern about the lack of vigour in the global macroeconomic picture could well inhibit the earnings outlook, Imara SP Reid said in its daily Market Snapshot on Monday.

Fed chairperson Janet Yellen cited worries about how the slowdown in China will hit the US economy as one of the reasons for keeping interest rates unchanged.

The local market is still considered overbought after last week’s strong rally started by the big jump in SABMiller’s [JSE:SAB] share price, which meant there is still some selling pressure around.

By midday the All-share index fell back to below 51 000 points and traded 0.62% weaker at 50 727 points, while the Top 40 index was 0.66% lower at 45 316 points.

The Industrial index gave up 0.69% by midday and the Financial index lost 0.66%. The Resources index was also 0.58% lower with the Gold index a modest 0.68% higher.

Imara SP Reid warned on Monday morning that the tone on the global markets will continue to be uncertain and advisers would do well to use brief moments of strength on the JSE to accrue profits.

SABMiller, which gained 18% over the past seven days on news that Anheuser-Busch InBev wants to do a deal with the JSE-listed company, was still in the limelight on Monday morning.

The share reached a new intraday 52-week high of R756.00 in early trading, beating the previous best of R754.11, before the share started to lose ground again. By midday it was 0.68% lower at R743.50.

The early gains were sparked by reports that AB InBev is close to lining up a group of banks to help finance a takeover proposal for SABMiller, and has sounded out the smaller brewer’s main shareholder about a deal. Banks are reported to be willing to offer more than $50bn of debt for the acquisition

The Altria Group, which owns about 27% of SABMiller, is reported to be open to considering a proposal from AB InBev, depending on the terms.

Among the other big industrial shares Naspers [JSE:NPN] lost 1.29% to R1 720.51, but British American Tobacco [JSE:BTI] gained 0.53% to trade near its previous high at R739.50.

In the resources sector BHP Billiton [JSE:BIL] lost 0.50% to R227.40, but Glencore [JSE:GLN] was 2.92% lower on yet another record low of R25.30. The share is now 58.71% lower than a year ago and has lost 53.37% over the past 30 days.

Among the other well-known shares on 52-week lows Comair [JSE:COM] lost another 3.45% to a new low of R2.50. Investors are concerned about the influence of the price war among low-cost airlines on Comair’s earnings, and the share lost 44.7% over the past 30 days.

Sun International [JSE:SUI], which lost 27.4% over the past 30 days, shed another 0.66% on Monday morning to trade at a new low of R94.53.

            
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