JSE likely to feel the effects of the Facebook scandal
The JSE looked set for its sixth trading day of losses on Tuesday morning as markets trading ahead of it took their cue from Wall Street.
The Nasdaq index closed 1.8% lower on Tuesday, dragged down by Facebook’s share price falling 7% to $172.56 as the social media company came under fire for allowing an advertising company employed by then presidential candidate Donald Trump, Cambridge Analytica, to harvest private user data.
The tech stock sell-off sparked by the Facebook scandal led to a 0.35% fall in Tencent, which slipped to $460.20, on Tuesday morning, a bad omen for Naspers and the JSE.
The S&P 500 index closed 1.4% lower on Tuesday, but a weaker rand translated that into a 0.2% rise to R32.50 for the JSE-listed CoreShares S&P 500 tracker.
At 7am the rand was trading at R12.02 to the dollar, R14.83 to the euro and R16.86 to the pound.
If February’s core inflation, which Statistics SA is scheduled to release at 10am on Tuesday, comes in at the expected 4.1%, it would normally raise the hope of an interest rate cut next week.
But the one percentage point increase in value added tax (VAT), which takes effect on April 1, would send inflation up again, making it unlikely the Reserve Bank’s monetary policy committee would vote for the repo rate to be cut from 6.75% to 6.5%, Investec Bank economist Annabel Bishop warned in a note e-mailed on Monday.
The economists’ consensus is inflation, as measured by the annual change in the consumer price index (CPI), remained level in February at January’s 4.1%, placing it well under the Reserve Bank’s 6% ceiling.
Bishop forecast the coming VAT increase would cause inflation to accelerate to average about 5% in 2018 and 5.5% in 2019.
This makes it unlikely Reserve Bank governor Lesetja Kganyago will announce a cut in the repo rate when he announces the committee’s decision at 3pm on March 28.
"This is particularly due to the Reserve Bank basing its interest rate changes on what CPI inflation is likely to be six to 24 months out, not what it has come out recently at," Bishop said.
Financial services firm Sasfin warned shareholders on March 6 that it expected to report a drop in interim headline earnings per share (HEPS) for the six months to end-December of up to 45%.
Sasfin said this drop "arose primarily from a large credit event related to a single client and an increase in the tax expense as a result of once-off changes in deferred tax assets and liabilities, substantially because of changes in tax legislation".