MARKET WRAP: JSE slumps as retailers and banks retreat on recession news
The rand falls 3% against the dollar, with analysts expecting some improvement in GDP growth later in the year, although a sharp rebound seems unlikely
The JSE closed weaker on Tuesday as general retailers, banks and property stocks retreated after SA fell into a recession following two consecutive quarters of GDP contraction.
The rand weakened more than 3% to the dollar at one stage, partly in response to a stronger dollar against the euro, and as investors sold off local stocks and bonds following the release of the GDP numbers.
The softer rand, together with a higher Brent crude price, heightens the likelihood of further interest-rate increases by the Reserve Bank. This would depress consumer spending further.
The prospects of any meaningful improvement later in the year appear dim. “The economy could embark on a recovery over the rest of this year, but a sharp rebound is unlikely,” said Capital Economics analyst Jason Tuvey. “The latest data will further dent hopes that Cyril Ramaphosa’s presidency will lead to a marked turnaround in SA’s economic fortunes.”
The all share closed 1.4% lower at 57,891.80 points and the top 40 lost 1.42%. General retailers fell 4.27%, banks 4.17%, financials 2.58%, food and drug retailers 2.25%, industrials 1.76%, platinums 1.1% and property 0.83%. The gold index rose 0.62% and resources 0.55%.
Discovery slumped 4.12% to R170.95. This despite it earlier reporting overall group income to the year to end-June grew by 16.8% to R52.8bn and its net profit by 27.6% to R5.7bn.
FirstRand shed 5% to R67.05 and Absa 4.2% to R157.03.
Shoprite dropped 2.27% to R201.33 and Woolworths 2.89% to R53.07.
Redefine Properties lost 0.68% to R10.19.
Naspers closed 0.67% lower at R3,183.61.
After weakening to R15.3724 to the dollar during the day, the rand made a marginal comeback towards the JSE’s close, to R15.2344. It was at R19.546 to the pound after falling to an intra-day worst of R19.7138. The rand is now trading at its weakest level in two years. It was last above R15 to the dollar in July 2016, soon after the UK voted to leave the EU. It reached R11.50 in March this year on Ramaphoria, which now seems to be a distant memory.
Local bond yields rose sharply, with the benchmark R186 last bid at 9.21% from 9.02%. The US 10-year treasury was last seen at 2.8976% from 2.8622%
The top 40 Alsi futures index dropped 1.89% to 51,318 points. The number of contracts traded was 27,605 from Monday’s 16,932.