JSE faces higher Asian markets after Monday’s battering

The JSE is facing green screens in Asia on Tuesday morning and US markets overnight after a rough day on Monday which saw Naspers and international subsidiary Prosus take a beating because Tencent’s drop amid policy uncertainty after the 20th congress of the Chinese Communist Party at the weekend.

The Nikkei in Japan accelerated by 1.26%, the Hang Seng in Hong Kong 0.87% and the Shanghai composite in mainland China 0.74%. Year to date, the Hang Seng is down by more than a third (34.21%), the Shanghai composite 17.42% and the Nikkei 6.79%.

The markets in Japan followed the gains on Wall Street while Japanese companies who focus on exports benefited from a weaker yen.

Traders remain wary because of the policy uncertainty in mainland China with the world’s second-largest economy set to keep its strict zero-Covid policy in place and President Xi Jinping strengthening his grip on power during the conference.

Mainland markets are also being affected by the policy and economic uncertainty.

“Tech giants were under additional pressure amid fears of less market-friendly policy,” National Australia Bank economist Taylor Nugent wrote in a note on Tuesday.

Reports that China suspended in-person schooling and dining-in at restaurants in a district at the centre of Guangzhou will do nothing to allay fears of an ongoing gloomy consumer outlook, he said.

Bank of New Zealand senior interest rates strategist Nick Smyth wrote in a note on Tuesday that “investors are worried a prolonged period of zero-Covid policy and interventionist regulation will hamper Chinese growth”.

In local market news, the JSE was dragged lower by major tech stocks on Monday as Tencent shares sank in Hong Kong trade. In Asia, tech stocks dragged the Hang Seng with Tencent, which influences the JSE via Naspers, plunging 11% after Xi won a third presidential term at the weekend.

Naspers and its international subsidiary, Prosus, have been battered over the past year after a crackdown on technology companies by Chinese authorities. Naspers gave up 17.4% to R1,711.35 on Tuesday — its biggest one-day drop on record — while Prosus fell 15.19% to R741.48.

The JSE all share index lost 0.86% to 64,976 points and the top 40 shed 1.06%.

Meanwhile, US markets rallied on Monday as the Dow Jones ended 1.34% higher, the S&P 500 1.19% and the Nasdaq 0.86% amid reports that the US Federal Reserve’s next interest rate hike might be lower than expected. The Nasdaq has shed almost a third of its value so far this year (30.82%), the S&P 500 more than one-fifth (20.83%) and the Dow Jones 13.90%.

The rand is flat against the dollar, trading at R18.41 on Tuesday morning. The rand has depreciated by 13.14% against the greenback so far this year.

In commodities, the price of Brent crude, gold and platinum all rose. Brent crude increased 0.12% as it traded at $91.47 a barrel, gold 0.15% higher to $1,651.20/oz and platinum 0.22% to $926.07.

In corporate news, Jubilee Metals will release its annual results on Tuesday. On the economics front, the SA Reserve Bank will publish the latest composite business cycle indicators at 9am and Stats SA the tourism and migration data for August at 10am.

gousn@businesslive.co.za