Worries about global growth, the prolonged trade war and a moribund local economy have stopped South African stocks in their tracks.
After posting back-to-back quarterly gains, a feat not achieved since 2017, Johannesburg’s benchmark index is down 5% since the end of June as of Friday. That leaves it set for the worst third-quarter performance in nine years.
The property and construction sectors have been among the hardest-hit. But the malaise extends from technology to telecommunications, retailers, agriculture, education and financial services, as companies contend with unemployment of 29%, weak business confidence and an economy in its longest downward cycle since 1945.
Platinum miners and gold producers have delivered the flip side to this picture, shining during the quarter as investors swarmed to the haven appeal of precious metals in uncertain times.
The blockbuster event of the quarter was the carve out by Naspers Ltd., the market’s largest stock, of its $120 billion internet unit Prosus NV for a listing in Amsterdam. Naspers, still 14% of the benchmark, has dropped about 6% since the Sept. 11 separation, weighing on the overall market.
The immediate outlook isn’t too bright either, judging by at least one technical indicator. Johannesburg stocks are trading below their 50- day and 200-day moving averages. A dip below the 200-day marker, in particular, may signal the beginning of a downtrend to some analysts who use that level to predict future moves.
Investors with longer-term horizons may regard this as a near-term glitch, given that they have benefited from South African stock outperformance over the past two decades. The main Johannesburg gauge has outpaced emerging-market peers in dollar terms since 1999.
And some argue that things may be about to improve, in any case.
JPMorgan Asset Management said it sees some opportunities in emerging markets, as earnings estimates are “sufficiently bearish” and price-to-book valuations are lower than average. “Historically at these valuation levels, investors have been rewarded over the long term,” said Richard Titherington, chief investment officer for emerging market and Asia-Pacific equities at the money manager.