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Johannesburg - The JSE did not escape the turmoil on global markets on Friday morning after the Chinese authorities shocked the financial world by unexpectedly raising short-term interest rates.
Resources shares were the big losers on the JSE as any deterrent to growth in China can have a disastrous effect on the demand for commodities. Some of the top resources shares were sharply lower.
By mid-morning on Friday the JSE's resources index was already 1.9% lower, sending the All-share and Top 40 indices lower. The All-share index lost 0.68% to 52 360 points and the Top 40 index traded 0.67% down at 45 553 points.
The rest of the market was also lower after Chinese shares tumbled, sending Asian markets skidding for their biggest losses in two weeks. European markets also opened lower. At mid-morning the Industrial index on the JSE was 0.33% softer, while the Financial index had lost 0.20%.
The People's Bank of China surprised the market on the first day of trading after a week-long break for the Lunar New Year by raising interest rates on open market operations by 10 basis points.
Two banking sources also told Reuters it had raised the lending rates on its standing lending facility short-term loans, suggesting policymakers were tugging multiple levers to slow down a rampant build-up in debt among Chinese corporates.
The latest increases in market interest rates come after the central bank raised rates on its medium-term loan facility in late January. That was the first time it has raised one of its policy interest rates since July 2011.
The increases are also aimed at bolstering the yuan after record capital outflows in recent months. The Institute of International Finance estimated capital outflows from China surged last year to a record $725bn.
The markets, which are already on edge about US President Donald Trump’s protectionist policies, are also waiting for a key US jobs report later in the day which will shed further light on the outlook for monetary policy in the coming months.
The uncertainty about China also offers investors the opportunity to take profits after resources shares gained more than 10% over the past month.
Anglo American [JSE:AGL], which before Friday’s bloodbath was more than 17% higher over the last month, at mid-morning was 4.09% softer at R223.44. African Rainbow Minerals [JSE:ARI], which gained more than 21% since the beginning of the year, lost 4.65% to R115.48.
Among the other commodity conglomerates Glencore [JSE:GLN] lost 4.23% to R52.54. Earlier this week the share traded at a 52-week high after gaining more than 16% over the past month. BHP Billiton [JSE:BIL] was 3.62% softer at R232.92, and South32 [JSE:S32] shed 2.40% to R28.10.
Kumba [JSE:KIO], which traded on a new 52-week high of R219.88 on Tuesday, lost 6.23% to R199.48. Before Friday the share was already an impressive 24.5% higher over the past 30 days.
The share price was also hurt by news that Kumba has settled its long-standing tax dispute with the South African Revenue Service (Sars). The settlement amount of R2.5bn is however much less than Sars' original claim of R6.5bn.
READ: Kumba to pay R2.5bn tax bill, shares dive most on JSE
Impala Platinum [JSE:IMP] lost 4.09% to R52.56 after the platinum price dropped 0.45% to $992.00. Anglo American Platinum [JSE:AMS] was 2.65% softer at R353.60.
Sasol [JSE:SOL] escaped the carnage, with oil prices edging higher as investors grew wary that the US may impose new sanctions on multiple Iranian entities, firing geopolitical tensions between the two nations. The share was only 0.09% softer at R396.41.
