JSE Ends Lower on SOE Financial Woes

  • Market Overview

The FTSE/JSE All Share Index (ALSI) closed lower on Tuesday led by financials, after a National Treasury briefing to Parliament confirmed that several state-owned enterprises remain under deep financial constraints. “In particular, Eskom made a whopping ZAR 21.2 billion loss in the 12 months through March 2023, its largest ever, despite a 9.61% tariff increase and a ZAR 21.9 billion bailout from the Treasury.” Business Day added. Sentiment was also dampened by concerns over the pending approval of a deal to increase the US government’s debt ceiling with a deadline less than a week away. The rand fell to a record low of R19.86/$ in intraday trading “after SA declared diplomatic immunity for attendees of the BRICS foreign ministers’ meeting starting on Thursday and the BRICS annual summit in August, potentially opening the door for Russian President Vladimir Putin to attend. The ICC has issued a warrant for Putin’s arrest over his invasion of Ukraine and says it expects SA to comply should he arrive in the country.” Reuters reported.

Asian markets fell on Tuesday after official data showed that Chinese manufacturing activity contracted further in May, while services activity growth slowed to a four-month low. “This reinforces speculations that the People’s Bank of China could lower interest rates again amid an unstable post-pandemic economic recovery,” Trading Economics added. The Nikkei ended 1.61% lower, while the Shanghai Composite Index and Hang Seng posted losses of 0.88% and 2.62% respectively.

Wall Street was mixed on Tuesday, “as investors were assessing the chance of debt bill path through Congress,” Trading Economics noted. European stock markets finished lower on Tuesday as market sentiment was dampened by a slump in oil prices. In economic news, the consumer confidence indicator in the Eurozone was confirmed at -17.4 points in May 2023, a new high since February 2022. In the European Union as a whole, consumer sentiment increased by 0.6 points to -18.3.

Tuesday saw a more than 4% decline in WTI crude futures due to concerns over the ratification of the tentative debt limit deal by US Congress after many Republicans said they would not support it. At the same time, the likelihood of declining demand, particularly in China, increased downward pressure. Short sellers were recently advised to "watch out" for potential repercussions by Saudi Arabia's energy minister, raising questions over whether OPEC+ will reduce production during a scheduled meeting on 4 June 2023.

PSG Wealth Daily Investment Update, 31 May 2023

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