Cigarettes stub out JSE’s rally

A US stockbroking firm’s report on the poor health of the cigarette industry gave the JSE a coughing fit on Monday afternoon.

British American Tobacco (BAT) fell 5.33% to R439, which in turn caused investment holding company Reinet — whose portfolio is dominated by BAT — to fall 5.1% to R204.15.

BAT and Reinet knocked the all share index down 0.47% to 51,959 points, tripping it up after a promising morning in which the index rose nearly 2% to breach 53,000 points for the first time in two months.

The top 40 closed 0.61% lower at 45,876, but the Satrix top 40 exchange-traded fund rose 1.49% to R46.93.

A global slump in cigarette company shares was sparked by Cowen downgrading its outlook on Altria to “market perform” from “outperform”.

Cowen forecast that the number of cigarettes Altria sells will average a 7.3% annual decline for the next five years. Although the report was primarily about Altria, it was downbeat about the overall cigarette industry. 

In London, BAT fell 4.2% to £24.74 and Imperial Brands fell 5% to £23.30. In New York, Philip Morris fell 3.06% to $67.42 and Altria fell 3.02% to $48.78.

Measured on market capitalisation alone, BAT is the JSE’s third-biggest company behind Anheuser-Busch InBev and Naspers.

But in terms of the methodology used by FTSE to create the all share and top 40 indices, Anheusher-Busch is completely excluded because it is considered a foreign company by SA’s pension fund regulations. BAT is considered the JSE’s 10th largest company in FTSE’s most recent weightings.

Monday’s drop took BAT’s annual decline to 47%. 

Asian markets generally appeared buoyant on Tuesday morning, although Naspers’s dominant asset, Tencent, was down 1.2% to HK$313.80.

The rand was relatively stable at R13.94/$, R15.95/€ and R17.79/£ at 7am.

laingr@businesslive.co.za