JSE stocks slides as valuation worries bite

Stocks on the JSE rose 4% in the previous three sessions, reigniting concerns that prices were overheated.

However, the caution could be short-lived given the volatility in global markets and indications on Thursday that the US Federal Reserve is in no hurry to start raising rates, trader said.

"Even though the SA Top-40 index still looks over-valued, South Africa has been tracking global markets, which are running on sentiment around possible quantitative easing in Europe and China," said Uresh Perera, a trader at Global FX Macro.

Local shares could also get a bounce next week after US job figures on Friday were slightly better than expected.

The JSE Top-40 index lost 1.55% to 42 995, while the broader All-Share index dropped 1.3% to 48 951.

Despite a lacklustre 6 percent rise last year - and on-going concerns about the domestic economy - the Top-40 is the fifth most expensive index among more than 30 emerging market stock indices tracked by Thomson Reuters.

"South African equities as an asset class are fully priced and not a compelling investment," Adrian Saville, the chief investment officer at Cannon Asset Managers, said in a note this week.

Shoprite, Africa's largest grocer, tumbled 4.4% to R172.05. With a price-to-earnings ratio of around 25, the retailer is the seventh most expensive stock on the Top-40.

Aspen Pharmacare, a drugmaker that is trading at a hefty 38 times earnings, fell 2.2% to 421.52. Aspen has been the top performer on the index over the last 12 months, gaining around 60%.

Trade was slow, with 114 million shares changing hands, well below last year's daily average of 183 million shares.