File photo: Reuters

Johannesburg - South Africa’s main stocks index fell in the longest losing streak in a decade as foreign investors sold equities after worse-than-estimated factory data cast doubt on the recovery in the US economy.

The all share index fell for an eighth day – the longest stretch since February 2004 – dropping 1.12 percent to close at 44 451.57.

At least four stocks fell for every one that gained amid a global equity rout that has wiped about $2.9 trillion (R32 trillion) from shares this year. The index has dropped 5.8 percent since January 24.

The sell-off in the local economy joins emerging markets that were jolted by the start of Federal Reserve tapering last month. Foreign investors sold a net R1.04 billion of stocks on Monday, bringing outflows to R1.52bn this year, according to data from the JSE.

“There is selling pressure and it is predominantly driven by foreign selling,” Brendon Hubbard at ClucasGray said yesterday. “Stock valuations are not at a really cheap level to tip people back in. Local fund managers are sitting on cash.”

But strategists warned that the sell-off in emerging market assets, which sent the benchmark equity index to the lowest valuation since the 2008 financial crisis, might have gone too far, according to UBS chief executive Sergio Ermotti.

“What we are seeing right now is a lot of money exiting the emerging markets. Short term, it looks a little bit overdone,” Ermotti said in Zurich on Bloomberg Television’s Countdown.

“Like we saw in the last few years, when there are excesses in terms of expectations about one asset class or the other and things move in the wrong direction, you have very violent moves on the other side,” said Ermotti, whose bank reported fourth-quarter profit that beat analysts’ estimates yesterday.

Some strategists see further losses for emerging markets. Inflation-adjusted interest rates are still too low in developing nations for Citigroup and Goldman Sachs to foresee an end to the retreat in currencies.

One-year borrowing costs in Turkey are about 3.3 percent, less than half the average in the three years before the 2008 global financial crisis, even after the central bank doubled its benchmark rate last week, according to data.

Ermotti said it was important to differentiate between developing nations when making investment decisions.

“Clearly not all emerging markets have the same kind of prospects going forward,” he said. “So we have to pay attention to the underlying dynamics of each economy before making final judgements on how we invest our clients’ money.”

“The forces at play are much greater” than just South African factors, Jean Pierre Verster at 36One Asset Management, said.

“Central bankers of emerging market economies are at the behest of what is happening globally and, specifically, the impact of the tapering.” - Bloomberg