Johannesburg - Share prices on the JSE took a big hiding during last week as negative global sentiment towards commodities and emerging markets took its toll.
Fears of a downgrade in some or other of the various categories by S&P Global Ratings on Friday evening had a devastating effect on the share market. S&P, however, later announced it had kept the country’s rating unchanged.
The expectations of yet again better US job data also played its role, especially on Friday. Improved US job data will ring the final bell for an increase by the Federal Reserve of the bank rates. The geo-political situation in South Africa in relation to President Jacob Zuma and a possible cabinet reshuffle also contributes to foreign institutional investors jittery.
The all share index lost 1440 points or 2.8 percent during last week. Industrial shares lost 3.2 percent, resources were down 3.1 percent and financials retreated 1.6 percent.
Property shares also felt the negative sentiment and decreased by 0.8 percent over the week. Despite negative market sentiment and the geo-political fears around the central government, the rand exchange rate stood its ground. Against the dollar the local unit gained 1.5 percent or 21 cents over the week.
Rand hedgers, therefore, also traded down strongly during last week. Naspers closed down 2.72 percent at R1 980 and BHP Billiton was lower by 1.35 percent at R231.43 on Friday.
This week, investors will react to the outcome of the S&P rating, as well as on various economic growth rate data that will be released. The announcement of South Africa’s economic growth rate during the third quarter on Tuesday will be important. This will set the scene for future possible rating changes.
The release of domestic deficit on the country’s current account on Friday by the reserve bank will also be of significance, as it also plays a big role in rating agencies prospects for future decision.
Globally various developed economies will also publish their gross domestic product rates during the third quarter. The rates for the EU and Japan will be of particular interest.
The treasury on Friday also warned that a downgrade to sovereign debt junk whenever, could double government’s debt costs.