Johannesburg - China’s decision to devalue its currency caused a rout on world markets and the JSE followed those markets lower on Wednesday morning.
Not even the fact that the rand reached its lowest level since 2001 could help the dual-listed shares of companies that earn most of their income abroad.
By midday the All-share index had dropped sharply below the level of 52 000 points and the Top 40-index was again below 46 000 points. The All-share index traded 1.85% lower at 51 325 points and the Top 40-index was 1.85% weaker at 45 762 points.
The Financial index had lost 1.90%, the Industrial index 1.78% and the Resources index 1.60%. The only exception was the Gold index which was another 6.28% up after Tuesday's recovery on the back of a higher gold price, which strengthened again on Wednesday morning.
The rout started on Tuesday after China’s announcement. Industrialised countries immediately witnessed a sell-off in equities as exports from the US, UK and in particular Germany immediately became more “expensive” in China.
It continued on Wednesday morning with Frankfurt's DAX 2.43% lower by midday, the CAC 40 index in France 2.75% softer and the Hang Seng index in Hong Kong losing 2.66%. On Tuesday evening Wall Street also closed substantially lower.
South Africa’s exports will also be less competitive in China, but the blow will be softened by the level of the rand which at midday traded at R12.82 for a dollar. The rand is already 11% lower for the year.
In the long run, any move to strengthen the Chinese economy will however be good for the demand and prices of commodities, which are still South Africa’s biggest exports.
On Tuesday the JSE started on a positive note, but the mood soured as overseas markets started to fall. The All-share index was still in the black at the close but lost more than 700 points during the day. The Resources index, which was more than 2% up in the morning, closed 0.43% down.
Imara SP Reid warned in its daily Market Snapshot that uncertainty had returned to the markets as a result of the inconsistency on global markets, substantial currency adjustments and slightly higher volatility.
Technical analysts suggest that a level of around 46 120 points for the Top 40-index has now taken on clear significance.
The sell-off of resources stocks in London, which started on Tuesday, continued in the morning with the major dual-listed stocks also losing ground on the JSE on Wednesday morning. BHP Billiton [JSE:BIL] was 2.10% lower at R244.77 and Anglo American [JSE:AGL] lost 2.22% to R151.70.
Glencore [JSE:GLN], which is involved in a public spat with Eskom and the government over the future of its Optimum coal mine in Mpumalanga, was the biggest loser and traded 4.70 softer at R36.28.
Among the double-listed industrial shares which also have interests in China, Richemont [JSE:CFR] lost 2.34% to R103.00 and Naspers [JSE:NPN] was 0.41% lower at R1 725.99.
With the price of oil still below $50, Sasol [JSE:SOL] lost another 2.03% to R418.25. Concerns about the Chinese economy raised questions about the future demand for oil.
In the financial sector Standard Bank [JSE:SBK] was 2.31% lower at R156.61 and FirstRand [JSE:FSR] lost 2.02% to R55.36. The old rivals, Sanlam [JSE:SLM] and Old Mutual [JSE:OML], were among the busiest shares in morning trade with Old Mutual losing 2.22% to R44.10 and Sanlam 2.99% to R65.91.
The biggest winners were all gold shares. DRDGold [JSE:DRD] gained 10.98% to R1.98, while Gold Fields [JSE:GFI] traded 7.95% higher at R36.40. Harmony [JSE:HAR] was another 7.01% stronger at R134.59.