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JSE stocks, metal and minerals indices slump in global sell-off

DENKER Capital portfolio manager Claude van Cuyck said the “hugely risk off” environment was largely being driven by inflationary pressures and rising interest rates, with the spectre of demand destruction in key markets as growth slowed. Picture: Simphiwe Mbokazi.

DENKER Capital portfolio manager Claude van Cuyck said the “hugely risk off” environment was largely being driven by inflationary pressures and rising interest rates, with the spectre of demand destruction in key markets as growth slowed. Picture: Simphiwe Mbokazi.

Published May 13, 2022

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THE mineral and precious metals boom lost lustre yesterday after a brace of indices on the JSE fell sharply as they moved in sympathy with stock markets globally that had been driven lower on fears of lower growth.

The declines, which saw the share prices of some of South Africa’s leading miners slump, was mirrored in the international price of copper, which fell to a more than seven-month low - the price is often seen as a benchmark for metals price trends and global industrial activity.

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The US had reported stronger-than-expected inflation a day before, forcing the Nasdaq index down 3 percent, while the S&P 500 marked a fourth decline in five sessions. The JSE All Share Index was down 3.01 percent early yesterday afternoon.

The price of three-month copper on the London Metal Exchange fell 2.8 percent to $9.081 (R143) a ton as of early yesterday morning, its lowest level since October 6, with the price weighed down by demand worries and rising stocks, amid lockdowns in top consumer China and fears of a global economic slowdown.

On the JSE, the Precious Metals and Minerals Index had fallen 7.29 percent by midday, the Basic Metals Index was down 6.1 percent, the Industrial Metals and Mining Index was down 6.02 percent, while the Resources Index was down 5.93 percent.

Anglo American Platinum’s share price fell a whopping 9.23 percent to R1466.28, the Impala Platinum share was down 8.13 percent to R1 73.02, while Sibanye’s share price lost 7.75 percent to R43.45. Northam Platinum’s share price was down 7.3 percent to R164.23, while African Rainbow Minerals’ share price was down 7.43 percent to R164.23.

Asian stocks fell to almost two-years low yesterday, European shares tumbled and oil prices were down 2 percent, this, according to Reuters, after the dollar rose to fresh two-decade highs, as concerns that tighter monetary policies in the US to tame surging inflation will hurt the global economy dampened risk sentiment and drove investors into the safe-haven currency.

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Flagship Asset Management fund manager Kyle Wales said the “risk off sentiment” in markets was due to the rising inflation and its likelihood of lowering discretionary spending, compounded with concerns about the effect on China’s market arising out of its zero-tolerance policy towards Covid-19.

China is the largest source of global demand for many commodities. Wales said many commodity stocks still looked relatively expensive despite the declines in their prices yesterday.

Denker Capital portfolio manager Claude van Cuyck said the “hugely risk off” environment was largely being driven by inflationary pressures and rising interest rates, with the spectre of demand destruction in key markets as growth slowed.

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He said, however, that while markets were volatile currently, there were many South African-listed companies offering real growth potential and potentially robust returns over the longer term for shareholders, at reasonable prices.

Andrew Dittberner, Old Mutual Wealth Private Client chief investment officer, said a myriad factors had led to the recent volatility and draw-down in global markets.

“Global inflationary pressures are top of the list, followed by concerns around how quickly central banks pull the reins in on the ultra-loose monetary conditions that markets have become accustomed to,” he said.

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He said possible further interest rate increases in the US might result in a recession in the world’s most important economy and equity market. “And if this is not enough, throw in geopolitical issues and ongoing draconian lock-downs in China, which exacerbate the world’s current supply chain issues and place a damper on consumer demand,” he said.

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