JSE slips as China data sours global mood

Johannesburg - A sharp decline in China’s trade data for September sent global markets into a spin on Thursday and the JSE followed suit, with the major indices more than 1% lower at mid-morning.

Naspers [JSE:NPN], which has a large exposure to the Chinese economy, lost more than 3% as the Industrial, Resources and Financial indices all lost ground by mid-morning. The Gold index, which benefited from turmoil on the markets, was 4.28% higher.

The mood on global markets soured on Thursday morning after data showed Chinese imports in dollar terms were lower in September, while exports dropped by a sharper-than-expected 10%. The weak trade data fuelled new concerns about the state of the Chinese economy, while some analysts said it could also be an indicator of weaker-than-expected global demand.

Asian shares dropped to a three-week low on Thursday while European shares were also sharply down, putting pressure on local shares which are also listed on European markets. US futures and bond yields also lost ground, indicating that Wall Street could also open lower.

Analysts said the mood in global markets has deteriorated since the third quarter, when shares outperformed, due to new concerns about the global economy, a possible Bexit fall-out and fears that Deutsche Bank’s woes could lead to systemic risks for the German banking sector and globally.

The minutes of the US Federal Reserve’s latest open market committee also showed that several policymakers judged a rate hike would be warranted “relatively soon” if the US economy continued to strengthen.

The result was that the All-share index at mid-morning was already 1.25% lower at 50 904 points, while the Top 40 index traded 1.47% down at 44 386 points. The All-share index at mid-morning was only 3% higher for the year to date and is virtually unchanged since March 1, when it stood at 50 977 points.

The rand also dropped back on Thursday morning to R13.47 per dollar, but the weaker unit could not do much for the big rand hedge shares in the industrial sector, which at mid-morning was 1.36% lower.

Naspers, which represents almost 20% of the All-share, led the Industrial index lower and lost 3.2% to R2 227.95. The share price is sensitive to the Chinese economy as its 34% stake in Chinese internet giant Tencent represents most of the company’s market capitalisation and income. Tencent, the biggest company in China which is listed in Hong Kong, shed 1.59% on Thursday morning.

Naspers is now almost 13% lower than the all-time high of R2 530 reached on September 6.

MTN [JSE:MTN] lost 2.78% on Thursday morning to R110.35 and Steinhoff [JSE:SHF] was 0.29% lower at R74.60. Richemont [JSE:CFR] continued its recovery and at mid-morning was 1.17% higher at R92.84.

The Resources index was 1.36% lower at midmorning, as China is the world’s biggest consumers of metals and other commodities. Mining shares were also sharply lower on the European markets and that pulled the big dual-listed commodity shares, some of which were trading at 52-week highs, steeply down.

Anglo American [JSE:AGL], which was trading at a 52-week high on Wednesday, lost 1.86% to R177, but in earlier trade the stock was almost 3% down at R174.51.

BHP Billiton [JSE:BIL] shed more than 3.5% in earlier trade to R206.03, but recovered later and at midday was only 2.66% softer at R208.68. US bank Citigroup cut its rating on BHP Billiton from “neutral” to "sell".

Glencore [JSE:GLN] lost about 1% in earlier trade but recovered and reached a new intraday 52-week high of R40.66 by mid-morning, 0.64% up on the previous day’s close.

Gold shares were however sharply higher with Gold Fields [JSE:GFI] gaining 5.51% to R60.14, Sibanye [JSE:SGL] 5.3% stronger at R60.40 and DRDGold [JSE:DRD] trading 5.1% higher at R6.79.

A weaker rand is normally bad news for financial shares. The financial sector, which lost 1.7% in morning trade, was also hit by continued pressures on banking shares in Europe, where Deutsche Bank faces a claim of more than $14bn from US authorities for alleged miss-selling of home loan securities. On Thursday it also became known that Deutsche Bank will pay a $9.5m penalty to settle civil charges that it failed to properly safeguard material non-public information generated by its research analysts.

FirstRand [JSE:FSR] was sharply down and lost 2.88% to R44.22, while Standard Bank [JSE:SBK] traded 1.83% softer at R137.85. Old Mutual [JSE:OML], which is also listed in London, lost 1.91% to R33.43.