Market moves: ‘It’s not just about the numbers’

051115 (L) JSE Director for capital Markets Donna Oosthuyse,MTN Zakhele Chairperson Sindi Mabaso-Koyana,MTN SA CEO Mteto Nyati and JSE CEO Nicky Newton-King at the listing of the MTN Zakhele on JSE board.photo: Simphiwe Mbokazi

051115 (L) JSE Director for capital Markets Donna Oosthuyse,MTN Zakhele Chairperson Sindi Mabaso-Koyana,MTN SA CEO Mteto Nyati and JSE CEO Nicky Newton-King at the listing of the MTN Zakhele on JSE board.photo: Simphiwe Mbokazi

Published Dec 14, 2015

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South African capital markets posted significant losses and saw unprecedented activity following the announcement by President Jacob Zuma on the evening of December 9 to replace the finance minister.

Investors, ranging from individual retirees to huge pension funds, have seen the value of their holdings plummet. Businesses already under pressure now face increases coming from rising borrowing costs and a weaker rand, which devalued from R14.53 to R15.89 (9.36 percent) against the dollar and from R15.94 to R17.45 (9.47 percent) against the euro in the two subsequent days.

Last Thursday and Friday saw exceptional trading volumes across most platforms of the JSE:

- Average daily value traded in the equity market on those two days, at R47.8 billion, was more than double the year to date average for 2015 (R19.9bn).

- Average daily number of trades in the equity market on those two days of 589 721 (both of which were record trading days) was more than double the year-to-date average of 246 338 trades.

- The JSE financial 15 index dropped 13.36 percent from 15 600 to 13 515 points.

- The banks index lost 18.54 percent, dropping from 6 556 to 5 340 points.

- The all share index dropped 1 456 points in those two days, closing at 48 068 on Friday, down 2.94 percent.

- The JSE Top40 index shed 987 points over the same period, closing at 43 558 points on Friday.

- The entire market cap fell R169.6bn to R11.18 trillion (1.49 percent).

- Activity in equity derivatives also peaked – value traded on Thursday (R51.1bn) was double that of the daily average of the year and on Friday (R129.7bn) was five times the daily average of 2015.

- In the bond market, the benchmark R186 started the week at a yield of 8.66 percent and closed on 10.40 percent. By contrast, on January 29 it was 7.055 percent.

While the JSE systems were able to handle this unprecedented activity, we should not just be concerned about the immediacy of market reaction but should be mindful of the longer-term impact on the financial stability of our economy.

Market losses put strain on credit extension and interest rates, and raise borrowing costs for companies and individuals. As cost of capital becomes more expensive, this in turn constrains the growth stimulus that we desperately need. The outlook for much-needed job creation opportunities diminishes.

Rising costs

And higher lending rates make everyday life more expensive for ordinary South Africans. Continued currency depreciation will have a profound impact on fuel prices and on inflation overall, which will hurt companies, small businesses and individuals.

We should remember that behind the daily statistics are the life savings of ordinary South Africans, which are likely to be negatively impacted. This will put pressure on the ability of people to fund their health and housing requirements, their household budgets, their children’s education and their entrepreneurial aspirations.

As individuals and as corporates we need to be aware of how we are impacted by the seriousness of this moment and take accountability for how we respond.

* Nicky Newton-King is the chief executive of the JSE Limited.

** The views expressed here do not necessarily reflect those of Independent Media.

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