JSE loses as trade war weighs on equities

THE JSE closed a volatile session yesterday in the red, continuing its losing streak as the intensifying trade war between China and the US weighed on global equities.

The all share index closed the session 262 points down at 54 602 points from an intraday day low of 53 027 points, while the blue-chip top 40 index shed 128 points to 48 051 points from a day’s low of 46 469 points.

However, the JSE recovered in a late surge aided by Naspers, which recovered from a day’s low of R2 711.57 to close at R2 956.84, 2.60 percent stronger.

Markets economist at Capital Economics, Oliver Jones, said renewed concerns about protectionism appear to have taken a toll on equities.

“Aside from equities in the US and China, those in Korea, Taiwan and South Africa appear particularly exposed to a further deterioration in Sino-US trade relations. IT, consumer discretionary and consumer staples firms may be among the most vulnerable on a sectoral basis,” Jones said.

China, which is the second biggest economy in the world, took the fight to the US, with retaliatory tariffs on US goods, pressuring shares of manufacturers and machinery companies, along with other risky assets. It said it would place 25 percent duties on major US exports to China, including aircraft and cars, affecting $50 billion (R591bn) of goods.

The Dow Jones industrial average also fell more than 1 percent as big US manufacturers and chip makers bore the brunt of the deepening trade conflict while the S&P 500 was down less than 15 points.

Arthur Karas, the co-manager at Old Mutual Edge 28 Fund, said the JSE all share and top 40 followed the global trade war and concerns about the technology sector’s ability to deal with privacy issues. “In addition, we are currently in a rate hike cycle, which usually leads to investor worries over equity market valuations,” he said.

The key bank’s index closed 1.35 percent down. Nedbank closed the day 2.53 percent down to R277.79, while Barclays Africa shed 1.61 percent to R182.00, FirstRand 0.94 percent lower to R65.69 and Standard bank 1.36 percent down to R211.86.

Wayne McCurrie, a fund manager at Ashburton Investments, said the trade war has seen an escalation after China announced reciprocal tariffs on the US imports.

“I think President Trump will start to back-pedal on this after seeing the very negative effect on US markets,” McCurrie said. “It is easy to talk and make largely symbolic moves initially for political gains, but if the fallout escalates it will harm the US more.”

Chief investment officer at Aeon Investment Management, Asief Mohamed, said he expected the prospect of trade wars to be reversed.

“Markets are falling largely on fears of an escalating trade war between the US, China and other countries. The technology sector stocks, known as FAANGs in the US, may also be impacted by the expectation of an escalating trade war,” Mohamed said.