The JSE is facing mixed Asian markets as investors fret as Covid-19 cases climb to near record highs in mainland China and a few deaths were reported in the capital Beijing at the weekend.
The Nikkei in Japan and the Shanghai composite in mainland China increased 0.69% and 0.75%, respectively. The Hang Seng in Hong Kong declined 0.39%. Year to date, the Hang Seng is down close to one quarter (24.43%), the Shanghai composite 14.43% and the Nikkei 3.97%.
Tencent was flat, but has fallen by 37.64% so far in 2022.
The Hang Seng retreated as it mirrored losses on Wall Street overnight and traders worry about the rising number of new Covid-19 cases in mainland China.
“Beijing’s Covid cases have climbed, although the government still labels Chaoyang district, the business centre, a low-risk area. Most Beijing residents have apparently still been staying at home,” ING’s Robert Carnell and Iris Pang said in a note.
The Shanghai composite continues to whipsaw amid the domestic Covid-19 situation and the zero-Covid policy in the world’s second-largest economy.
“China remains entirely polarising,” SPI Asset Management managing partner Stephen Innes said in a note.
“Bears fear a prolonged property downturn and an inability to kick-start growth as in the past, given debt levels. Some investors are convinced that China’s reopening is a formality and will be catalysed by the World Health Organisation (WHO) downgrading Covid-19 to an endemic,” he said.
In Japan, markets were lifted by a strong showing from domestic companies.
In local markets, the rand weakened along with other emerging-market currencies on Monday, while the JSE tracked softer US and European markets as the fear of stricter lockdowns in China amid a record daily spike in Covid-19 cases weighed on sentiment.
The JSE all share lost 0.88% to 71,938 points and the top 40 shed 0.96%. Industrial metals fell 2.32%, resources declined 1.94%, precious metals eased 1.27% and industrials retreated 0.83%.
US markets ended lower on Monday with the Dow Jones sliding 1.09%, the S&P 500 0.39% and the Nasdaq 0.13%. The Nasdaq has lost 30.37% of its value in 2022, the S&P 500 17.65% and the Dow Jones 7.89%.
While the Fed has indicated it will raise interest rates by smaller increments, its officials have been firm in their insistence that there is still a long way to go until inflation is back in check.
Investors will monitor the latest meeting minutes from the Federal open market committee (FOMC) due out later this week for clues about what size interest rate hike to expect in December.
“Investors are resigned to a recession, but very unsure of the timing and severity,” Innes said.
The rand strengthened by 0.38% against the dollar as it traded at R17.27. The rand has depreciated by 8.29% against the greenback so far in 2022.
In commodities, the price of platinum, gold and Brent crude rose. Platinum was up 1.22% to $990.40/oz, gold 0.41% to $1,743.98/oz and Brent crude 0.09% to $87.88 a barrel.
Tuesday will be another busy day in terms of corporate news, with Pepkor, Coronation Fund Managers, Omnia and Momentum reporting results.
Low-cost retailer Pepkor announced earlier that headline earnings per share (HEPS), a profit measure that strips out impairments and one-off items, will grow by 23.1%-33.1% to 163.4c-176.7c in its annual results.
Coronation said in a recent trading statement that its fund management earnings per share (EPS) will decrease by 10%-20% and HEPS 20%-30% to 341.5c-390.3c.
Chemicals, fertiliser and explosives group Omnia outlined last week that half-year losses at its Zimbabwean operations more than quadrupled, weighing on group earnings, but HEPS from continuing operations, which includes those in Zimbabwe, were expected to rise by 1%-11% from 286c.
The key focus this week in economics will be on the headline inflation rate for October and the Reserve Bank’s last interest rate decision for 2022, which will be announced on Thursday.
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