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Johannesburg - The JSE, along with other markets around the world, was reeling on Thursday from the aftermath of very disappointing company results from some of the biggest consumer companies in the US.
Company results are still the best indicator of real economic activity and the weaker than expected results by Walt Disney, Macy’s and Fossil renewed fears that share prices are probably overvalued after the market’s recent run.
The result was a huge reality check for Wall Street investors, with the Dow Jones Industrial Average suffering its worst day since February on Wednesday. On Thursday, Asian markets hovered around two-month lows, while European markets also moved into the red.
On the JSE, the impact was mostly felt by the big dual-listed and financial shares.
By mid-morning on Thursday, the All Share-index was already 0.70% lower on 51 717 points, with the Top 40-index even lower, losing 0.89% to 45 433 points. The main contributor to the drop was the industrial sector, which lost 0.73% and the financial index which traded 0.93% lower. The resources sector was 1.25% lower and gold only 0.24%.
US investors were particularly perturbed by Walt Disney missing analysts' targets, as it happens very rarely. The consumer discretionary index on Wall Street fell 1.98%, notching its worst day in three months, with all but three of its 88 components losing ground.
On the world’s second biggest market, in Shangai in China, the shares of healthcare and industrial companies led the market lower, as investors awaited the release of economic data.
Investors are looking for new indicators as the most recent data released showed the pick-up in economic indicators in March did not carry over to April. A report by the People’s Daily about the nation’s high levels of debt have also dampened hopes for more easing.
Data on new loans and money supply may be released as early as today, while reports on industrial production and retail sales are also due this week.
Among the big dual-listed conglomerates on the JSE's Industrial index, Naspers [JSE:NPN] traded 0.55% lower on R1 969.05 and SABMiller [JSE:SAB] 0.59% softer on R912.62. Richemont [JSE:CFR], which tends to be the most volatile among the big capitalisation shares, was 1.44% lower on R94.72.
A lot of attention was on the telecommunications sector, as Vodacom [JSE:VOD] overtook MTN [JSE:MTN] as the cellphone company with the biggest market capitalisation on the JSE. MTN’s market capitalisation was R244bn at the market close on Wednesday, trailing Vodacom’s R249bn.
The gap became bigger this morning with MTN losing more ground and Vodacom trading close to its 52-week high.
MTN’s shares have declined 31% since October 26, when the record $5.2bn Nigeria fine was made public. The penalty was later reduced to $3.9bn, but the company has yet to agree to a payment. By mid-morning on Thursday, the share was another 1.04% lower on R130.78.
Vodacom has gained 12% in the same period and traded another 0.42% higher on R168.16, just below the 52-week high of R168.35.
MTN is however still bigger than Vodacom in terms of customers and income. MTN, which had 229 million customers in 22 countries at the end of March, had revenue of R146bn and Vodacom is estimated to have generated R82bn in sales over the same period.
Telkom [JSE:TKG], which gained more than 12% over the past 30 days, lost 3.12% on Thursday morning to trade at R57.50. The company said in a trading statement this week that its reported headline earnings per share (HEPS) for the year till the end of March is expected to decrease by 40% to 50% when compared to the prior corresponding period due to restructuring cost. Its fixed line income dropped another 5% but the income from mobile data was 51% higher.
In the financial sector Barclays Africa [JSE:BGA] lost 1.32% to R135.98 and FirstRand [JSE:FSR] was 0.49% lower on R42.66. Standard Bank [JSE:SBK] was only 0.14% softer on R130.78. Old Mutual [JSE:OML] was 1.01% lower on R37.08.
In the resources sector the volatile Anglo American [JSE:AGL] lost 4.59% to R130.29 and BHP Billiton [JSE:BIL] was down 2.51% to R177.99.
The attention was however on the paper and pulp industry, with another industry giant announcing strong results due to better prices. Mondi [JSE:MNP] was 2.23% higher on R298.82 after the company said on Thursday that its first-quarter underlying profit rose 14% on strong performance from consumer packaging, uncoated fine paper and better sales in South Africa.
Sappi’s [JSE:SAP] share price gained more than 15% after it announced earlier in the week that its first quarter profit was almost double that of a year ago. On Thursday morning the share price was another 1.05% higher on R70.28.
