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Johannesburg - The JSE got off to a good start on Friday morning but this did not last long as investor confidence crumbled again amid another rout on world markets, with financial and resources shares the hardest hit.
By midday financial shares were again hammered by the weak rand, trading at R16.53 to the dollar. The Resources index was also more than 2% lower with the oil price again in the doldrums. Asian stocks slumped to three-and-a-half year lows, as the Chinese stock market is now officially in bear territory after losing another 3.5% on Friday.
Concern about the Chinese economy is bad for commodity stocks, as resources companies rely on China to buy most of the commodities they produce.
By midday the All-share index was 0.76% lower at 47 366 points and the Top 40 index had gained 0.65% to 42 644 points. The Financial index lost 1.5% while the Resources index was 2.2% lower. Even the Gold index was 0.78% weaker, despite a higher gold price.
The best performer was the Industrial index, which lost only 0.16%. The index was supported by the listing on the JSE by Anheuser-Busch (AB) Inbev, the biggest beer brewing company in the world, which made a decent debut on the local market.
READ: AB InBev lists on JSE with R1 938 opening tag
The low oil price is still hampering markets, as investors see weak demand for the commodity as a sign of slow economic growth worldwide. A rebound on Thursday in the oil price, largely driven by short covering, did not last long. By midday Brent crude oil traded at only $30.39 per barrel, 2.09% softer than the previous day.
There are fears that additional supplies from Iran will soon hit the oversupplied market after sanctions against that country were recently lifted.
The volatility of Chinese markets and the inability of the Chinese authorities to manage the deepest economic slowdown since 1990 are also cause for concern.
Chinese stocks fell back into a bear market on Friday morning, wiping out gains from an unprecedented state rescue campaign as investors lost confidence in government efforts to manage the country’s markets and economy.
The fall of more than 20% in share prices since the previous high is a setback for Chinese authorities, who have been intervening to support both stocks and the yuan after the worst start to a year in at least two decades.
Shares in the rest of Asia also slumped to three-and-a-half year lows on Friday as the MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.7% to the lowest level since June 2012, on track for a loss of 3.2% for the week.
Major European markets were also more than 1.5% down and the FTSE 100 index in London was near its lowest level in five months. This is normally bad news for the big industrial shares, but there was a great deal of interest in AB InBev, which started trading on the JSE to become the biggest counter on the bourse as the world’s largest brewer prepares to complete its takeover of SABMiller [JSE:SAB].
READ: AB InBev lists on JSE with R1 938 opening tag
The inward listed share opened as expected at R1 938.00 for a market capitulation of R3.1trn, almost double that of British American Tobacco (BAT) [JSE:BTI], which has a market capital of R1.6trn.
At midday the share was trading slightly higher at R1 940.00, after reaching a low of R1 922.00 and a high of R1 957.00. More than 294 000 shares were sold for R569m. The new share’s market capital is so big that any move in the share price will have an influence on the index.
The listing is part of the process of the recommended acquisition of the entire issued share capital of SABMiller by AB InBev. SABMiller traded 0.53% stronger at R971.66.
BAT was lower for the second consecutive day after trading at new highs earlier in the week. The share lost 1.40% to R850.87 at midday.
Naspers [JSE:NPN] was surprisingly strong amid the uncertainty about the Chinese economy, and traded 1.64% up at R1 860.01.
Richemont [JSE:CFR] announced disappointing trade results for the third quarter on Thursday, but the share price was 0.29% higher at R104.75. Sales in the third quarter at constant exchange rates were 4% lower, with Asian sales up to 9% weaker.
Sasol [JSE:SOL] lost 1.58% to R375.49 to R375.49 and is now almost 7% lower over the past seven days on the back of the softer oil price.
The flagship resources company on the JSE, BHP Billiton [JSE:BIL], dropped to below R150 on Friday and traded 3.25% lower on a new 52-week low of R146.86. The share price is now less than half the 52-week high of R296.00 reached less than a year ago. Anglo American [JSE:AGL] lost 2.64% to R56.70.
In the financial sector FirstRand [JSE:FSR] lost 3.10% to R39.73.
