JSE slips as rate hikes taint markets

The JSE fell to its weakest point since mid-July on Thursday, mirroring the global trend and signalling the extent to which investors are concerned about the effect of higher interest rates on the global economy.

The all share index lost 1.41% to close at 65,276.97 points, dragged down for the most part by mega-cap industrial shares, notably Richemont and Naspers, which dropped 3.56% and 4.47%, respectively.

As expected, the Reserve Bank hiked rates by 75 basis points to 6.25%, joining the US Federal Reserve, which tightened its policy by the same margin on Wednesday night.

“While the 75 basis points was expected and delivered by the Fed, the pace of interest rate increases is potentially what has market participants continuing to sell equities,” Lester Davids, an analyst at Unum Capital, said.

Capitec, SA ’ s largest retail bank with more than 18-million customers, lost 3% of its value to close at R1,649.06, the lowest level since August 2021, and was the main loser among the banks.

Higher interest rates are generally good for banks as they boost their lending margins. But there is a risk that ever-tighter borrowing costs could lead to clients defaulting on loans.

But even with the latest hike, Bank governor Lesetja Kganyago noted that the repurchase rate was only back to 2019 levels, before the Covid-19 pandemic. The monetary policy committee has been unwinding the record low interest rate that came after Covid-19 struck in 2020.

Life insurers ended mostly lower, as did the listed property sector, but gold shares got a reprieve after days of relentless selling in the sector.

The rand perked up 0.53% to 17.61/$, boosted by the rates hike. But commodity markets were mixed in late trade, with Brent gaining 0.70% to $90.56, while gold was little changed at $1,6710.60/oz.

Europe’s major stock indices extended losses heading into the close, with the Paris CAC 40 losing 1.87% and Germany’s Dax 1.84%.

“It’s hard to know where to start on a day like today. While the Fed ’ s hawkish rate hike is probably the dominant driver in the broader markets, the dangerous nuclear threats from the Kremlin are causing quite a stir, and then there’s the small matter of Japan’s first FX intervention in 24 years, which has triggered some huge moves in the yen,” said Craig Erlam, a senior market analyst at Oanda.