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Johannesburg - The JSE followed world markets lower on Wednesday after Chinese stocks extended their plunge, continuing to stoke fears about the stability of China's economy.
By midday the All-Share index on the JSE was 0.94% lower on 50 500 points and the Top 40-index traded 0.89% weaker on 45 064 points. Asian shares were the lowest in two years and by midday markets like Paris and Frankfurt were already almost 1% weaker.
Most of the JSE indices were lower with the Resources index losing 0.90%, the Financial index 0.90% and the Industrial index 0.74% softer. The Gold index, which was solidly higher on Tuesday, were only 0.13% lower.
Disappointing results from companies such as Massmart [JSE:MSM] and Glencore [JSE:GLN] also pulled indices lower as their share prices were severely hammered. Investors are also waiting for the release of the minutes of the latest meeting of the Federal Reserve’s open market committee, which will be released after the local market’s closes.
Analysts expect that it could have a decisive influence on the market the rest of the week if policy makers give a clear indication of what will happen to US interest rates and when.
But most of the attention on Wednesday morning was on China.
The Shanghai Composite Index retreated 2.8%, extending Tuesday's 6% slide, amid growing worries that the government could be scaling back its efforts to support the stock market.
China's securities regulator said late last week that the market had normalised and the government would allow market forces to play a bigger role in determining stock prices.
Naspers [JSE:NPN], the company that is probably mostly affected by what is happening in the Chinese economy, was steady this morning and was by midday only 0.09% higher on R1 699.43. It traded earlier as high as R1 711.00.
Amongst the big losers were Massmart, which traded 10.26% lower on a new 52-week low of R114.74. The market was shocked by a trading statement that the group’s headline earnings for the six months till 28 June will be between 22.4% and 29.8% lower than the first half of last year. Massmart lost more than 16% over the past three months before today’s sharp drop.
Shoprite [JSE:SHP], which gained more than 3% on Tuesday on strong results, traded 0.27% higher on R160.69. Shoprite, Africa’s biggest retailer by sales, announced plans to accelerate its expansion on the continent and reported a 10.8% jump in full-year earnings.
The mood in the resources sector deteriorated after Glencore, reported a 56% slump in first-half profit as raw-material prices slid. The share price dropped 6.86%. Before today’s trading Glencore has already lost 36.3% over the past month and 44.96% over the past year. Glencore is also the worst performer on the UK’s FTSE 100 Index.
The world’s biggest mining companies are battling a slump in commodity prices that’s left copper and oil near six-year lows, while China’s economy expands at the slowest pace in a quarter of a century.
Kumba [JSE:KIO] and Lonmin [JSE:LON], two of the big losers in the commodity sector, also dropped sharply to new 52-week lows. Kumba, which was already 35.01% lower over the past month and 72.53% over the past year, lost another 3.18% on Wednesday morning to trade at R89.13.
Lonmin dropped another 13.87% to trade at only R5.85. Before today’s trading the share price was already 64.8% lower over the past month and 82.5% over the past year.
