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Johannesburg - The sharp drop in share prices on the JSE over the past month continued on Friday morning, and the All-share index at midday was lower than its closing level on December 31 last year.
The index lost another 1.54% on Friday after falling 7.13% over the previous 30 days, wiping out all of the gains made earlier this year. It was about 9% higher for the year in April, but has lost everything since then.
The All-share index stood at 49 647 points at midday, marginally lower than its closing level of 49 770.6 points on December 31 last year.
The Top 40 index, which moved mostly in tandem with the All Share-index, was only marginally in the black for the year. By midday it was 1.47% lower at 44 706 points, just above the level of 43 696 it reached on December 31 last year.
Most of the losses of the past month can be ascribed to expectations of a rate hike in the US which can lead to an outflow of funds from emerging markets, but on Friday morning there were other aggravating circumstances.
The markets were nervous about imminent reviews of the country’s credit rating, which may be announced later in the day. If the credit rating agencies downgrade SA's ratings even further, it could worsen the outflow of capital for local financial markets. The rand traded close to an all-time low of R14.39 to the dollar on Friday morning.
Banking shares are particularly sensitive to these issues, and at midday the Banking index was on its lowest level since October last year. Three of the four big banks are currently trading at 52-week lows.
The Financial index was the biggest loser on Friday morning and shed 2.23% to 15 480 points, which is also below its level of 15 641 points on December 31 last year.
Standard Bank [JSE:SBK] was the biggest loser over the past seven days, giving up 8.87%, compared to 6.45% by Barclays Africa [JSE:BGA] and 4.3% by FirstRand [JSE:FSR]. Standard Bank fell 2.21% to a new low of R121.51 and FirstRand was 2.30% down at a low of R45.40. Barclays Africa dropped 1.31% to a low of R151.20.
Any hopes for a further injection of cheap money from the European Union chasing higher yields in emerging markets were also dashed on Thursday. A policy update by the European Central Bank (ECB) ended chances of any further easing of monetary policy to give the European economy a boost.
ECB president Mario Draghi announced that the bank’s bond repurchasing programme will be extended but not increased. European markets saw the biggest drop in four months on Thursday and continued their descent on Friday.
READ: Global stocks fall as ECB underwhelms investors
This is bad news for big industrial shares also listed on European markets, and the Industrial index dropped 1.53% on Friday to below the important psychological level of 70 000 points. The 69 238 points at midday is however still about 10% higher than the 62 352 points on December 31 last year.
Among the big industrial shares Richemont [JSE:CFR] dropped 0.58% to R106.83 and British American Tobacco [JSE:BTI] was 1.02% lower at R822.10. Sasol [JSE:SOL] lost 1.7% to R384.42. SABMiller [JSE:SAB] however bucked the trend and gained 0.76% to trade at R876.00.
Naspers [JSE:NPN] lost 2.81% to R2 011.75 after an announcement that the company raised $2.5bn from institutional investors to help fund its investments into e-commerce companies, including the Russian classifieds business Avito.
A total of 18.2 million shares were placed at R1 975 ($137) each in a bookbuild. The new shares, which are expected to start trading on December 11, represent about 4.3/% of the company’s ordinary shares before the capital raising. In October Naspers said it would increase its stake in Avito, Russia’s largest classifieds site, to 67.9% from 17.4%.
Naspers, which reached a new high of R2 233 at the end of last month, lost 5.94% over the past seven days until Thursday.
MTN’s [JSE:MTN] share price dropped again by more than 4% on Friday, after the Nigerian communication regulator increased the company’s fine by $500m to $3.9bn after the country’s telecommunications regulator said it wrote the incorrect penalty in an earlier letter to MTN.
READ: Nigeria fine ‘typo’ sends MTN shares tumbling
MTN announced on Thursday that the fine was reduced by 35% from $5.2bn to $3.4bn, but the authority said it was a typo and the reduction should have been 25%.
Investors expected a bigger drop and the share price dropped sharply. Before Friday’s fall the share price lost 26.4% of its value over the past 30 days.
The Resources index was 0.65% higher at 25 480 points by midday on some bargain-hunting, but Friday’s level is nearly 38% lower than the 41 930 points recorded on December 31 last year.
