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JSE down on Brexit uncertainty

Johannesburg - Share prices on the JSE dipped from the onset on Tuesday in reaction to weaker global markets which are caught up in uncertainty over next week’s referendum in Britain on the country’s future membership of the European Union.

Recent polls indicate a distinct possibility that the “out” vote might win, which could push the European economy back into a recession.

READ: High anxiety over Brexit survey crashes UK site

All major indices on the JSE were already more than 1% lower within the first half hour of trading. The EU is still South Africa’s major trading partner and a recession in Europe would have a devastating effect on South Africa’s exports, which are already under pressure.

By mid-morning the All-share index was 1.69% down to 51 626 points and the Top 40 index also traded 1.69% lower at 45 648 points. The big losers were financial shares with the Financial index already 2.68% lower, while the Industrial index lost 1.41%. 

The Resources index was also 1.79% lower, but the Gold index was 0.11% higher as gold is regarded as a safe haven in times of uncertainty.

This means that all the JSE's gains of the past month were wiped out by mid-morning on Tuesday, as the All-share index was only 1.15% higher over the past 30 days before Tuesday’s trade, with the market having lost more than 3% over the previous seven days. It was however still more than 9% higher over the past three months.

After Wall Street dropped for the third consecutive day on Monday, Asian shares also lost ground on Tuesday and European markets opened sharply lower.

Investors are also waiting for central bank meetings this week which are taking place amid growing uncertainty of what a British exit could mean to the current world economic order. The Bank of England, the Swiss National Bank and the Bank of Japan are all expected to make no moves on policy with the Brexit vote looming.

“Brexit would present the first formal challenge to the current global economic order and could spark a much wider and more dangerous fracture of the European Union,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

"Short-term hedge funds have started betting on Brexit,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

The euro dropped to its lowest level against the yen since February 2013. It was last at ¥119.88, down 0.4%. Sterling, which was broadly down, fell to a three-year low against the yen at ¥149.50.

The dollar also strengthened against the euro and the pound, with negative consequences for commodity prices and the rand which traded at R15.29/$ in morning trade.

Crude oil prices continued to slip, pressured by the strong US dollar and worrying economic prospects in Europe and Asia, though losses were contained by ongoing supply outages in Nigeria. Brent was down 1% at $49.84 per barrel, while US crude shed 1.1% to $48.34.

READ: Oil prices fall with world markets, stockpiles data eyed

Sasol [JSE:SOL], whose income is directly linked to the oil price, lost another 1.36% to trade at R411.45 at mid-morning. The coimpany lost almost 14% of its value over the past week since warning that its profit could be up to 30% lower due to weak oil and gas prices.

Naspers [JSE:NPN] lost 2.03% to R2 160.36, which means the share price is now almost 4% lower than the all-time high of R2 311 reached on May 30 this year. The company’s market value, which was at R1.05trn at that stage, fell back to R965bn on Monday night, a drop of about R40bn.

MTN [JSE:MTN], which gained more than 13% over the past few days after it agreed to pay a heavily reduced fine of $1.7bn in a settlement with the Nigerian government for failing to deactivate more than 5 million unregistered SIM cards, traded sharply lower on Tuesday.

READ: MTN to list shares in Nigeria as part of fine deal, shares up 3%

By mid-morning the stock was already 4.43% softer at R138.05. The company said it would take immediate steps to list shares in Nigeria as part of a settlement deal, and that it would also issue an apology.

SABMiller [JSE:SAB] was one of the few major shares gaining ground on Tuesday and rose 0.5% to R924.44. Indications are that the proposed takeover of SABMiller by Anheuser-Busch InBev [JSE:ANB] will soon be approved by the Chinese authorities, one of the last hurdles in the way of the deal.

Pick n Pay Holdings [JSE:PWK] traded 13.93% higher on Tuesday morning after the company announced it would unbundle its 52% shareholding in Pick n Pay Stores to remove the Pick n Pay group’s pyramid control structure. Pick n Pay Stores [JSE:PIK] was however 2.43% lower at R68.36, in line with sharp drops in the retail sector.

Shoprite [JSE:SHP] traded 5.20% softer at R157.30, Spar [JSE:SPP] lost 4.70% to R193.00 and Clicks [JSE:CLS] was 1.46% lower at R111.92.  Woolworths [JSE:WHL] shed 2.44% to a new 52-week low of R79.22.

Sanlam [JSE:SLM], which warned of difficult trading conditions last week, was one of the biggest losers in the beleaguered financial sector and traded 4.36% lower at R59.21. Old Mutual [JSE:OML] was the busiest share on the JSE in terms of volume and lost 1.96% to R37.59. FirstRand [JSE:FSR] was 3.92% softer at R42.85.

Anglo American [JSE:AGL] lost 4.46% in the commodity sector to trade at R131.61 and BHP Billiton [JSE:BIL] was 2.29% down at R172.30.

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Rand - Dollar
19.08
-0.9%
Rand - Pound
24.03
-0.6%
Rand - Euro
20.57
-0.5%
Rand - Aus dollar
12.38
-0.2%
Rand - Yen
0.13
-0.9%
Platinum
890.97
-0.7%
Palladium
988.99
-1.3%
Gold
2,195.56
+0.0%
Silver
24.43
-0.9%
Brent Crude
86.09
-0.2%
Top 40
67,885
+0.3%
All Share
74,077
+0.2%
Resource 10
56,208
+1.0%
Industrial 25
103,636
+0.4%
Financial 15
16,471
-0.3%
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