South African stocks posted the biggest four-day decline in almost two years as the gauge fell from a record high after foreigners sold emerging-market assets.
The benchmark 166-member FTSE/JSE Africa All-Share Index (JALSH) plummeted 7.1 percent over the past four days, the biggest decline since August 2011, extending the drop since it reached a record on May 31 to 9.4 percent. It fell 2.4 percent to 38,075.22 by the close in Johannesburg.
SABMiller Plc (SAB), the world’s second-largest brewer, fell 3.6 percent, BHP Billiton Plc (BLT), the stock with the biggest market value, dropped 2.3 percent and Naspers Ltd. (NPN), the continent’s largest media company, slumped 2.6 percent.
“It’s getting very close to” a correction, Chris Gilmour, an analyst at Absa Asset Management Private Clients, which manages the equivalent of $1.2 billion, said by phone from Johannesburg today. A 10 percent decline is referred to by some traders as a technical correction. “The very elevated levels from which it came were generally speaking not supported by fundamental earnings growth. They were rather supported by massive amounts of cheap money sloshing around the world.”
The rand, the worst performer this year against the dollar among 16 major currencies tracked by Bloomberg, gained 0.6 percent to 10.1056 per dollar by 6:01 p.m. in Johannesburg The South African economy, the continent’s biggest, expanded at an annualized 0.9 percent in the first quarter, the slowest pace since a recession in 2009, and less than the 7 percent rate the government says it needs annually through 2020 to cut the jobless rate to 14 percent from 25 percent.
“Equity prices aren’t a true reflection of the country’s economic situation and the growth the companies are producing,” Rudi van der Merwe, Standard Bank Group Ltd.’s head of stockbroking in Johannesburg, said by phone today.
Investors started dumping emerging-market assets, including South African bonds and currency, after Federal Reserve Chairman Ben S. Bernanke said on May 22 he may scale back asset purchases that put cheap money in U.S. markets, some of which found its way to emerging nations. The selloff gathered pace when he said last week the program known as quantitative easing may end by mid-2014.
“Any pick up in interest rates will put pressure on economic activity and he is likely to find himself back where he started, adding more QE,” Van der Merwe said. “He created this monster and he’ll have to keep feeding it.”
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