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Sasol leads South African stocks to 4-year low as oil crash hits global markets

South African stocks plunged to a more than four-year low on Monday. Supplied

South African stocks plunged to a more than four-year low on Monday. Supplied

Published Mar 9, 2020

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JOHANNESBURG - South African stocks

plunged to a more than four-year low on Monday, joining a global

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sell-off in riskier assets as oil prices collapsed more than

30%, hitting chemical and energy firm Sasol the

hardest.

Saudi Arabia's plans to hike crude production and slash its

official selling price came after Russia on Friday balked at

steep production cuts proposed by the Organization of the

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Petroleum Exporting Countries (OPEC) to stabilise prices hit by

economic fallout from the coronavirus.

The decline in the Johannesburg All-Share index and

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Top-40 index was compounded by fears the impact from

the fast-spreading coronavirus will intensify.

South Africa confirmed its first case of the virus on

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Thursday, and by the weekend officials had confirmed another two

cases.

At 0904 GMT, the All-Share index weakened 5.84% to 49,025

points, a level last seen in February 2016, while the Top-40

index tumbled 6.02% to 43,947, its weakest level since January

2017.

"The collapse in oil is being felt across all asset classes

today," said FXTM Chief Market strategist Hussein Sayed in a

note.

"Over the past three weeks, investors have been revisiting

their portfolio's asset allocation to adjust for the coronavirus

impact. Now, they also need to take into consideration the free

fall in oil prices which could accelerate recession risks."

Chemical and energy firm Sasol was the biggest decliner,

sitting at the bottom of both indexes and on track for its

biggest ever one-day fall. Shares plunged 44.46%, to a

6-1/2-year low.

Mining stocks also took a hit as silver,

palladium, platinum and gold prices fell.

The mining index slumped 7.14%.

In the currency market, the rand was 1.66% weaker

at 15.9300 per dollar at 0925 GMT, having plunged to 16.9850,

its lowest since February 2016, earlier in the session.

The sell-off was exacerbated by low liquidity in early

trade, resumption of power cuts and the ongoing unwinding of

carry trades as downgrade risks heightened.

Bonds also suffered despite indications that central banks

in developed markets, including the U.S. Federal Reserve, would

intervene further by cutting lending rates to shield their

economies.

"While this should theoretically play into the hands of the

rand as the interest rate differential grows, only time will

tell whether this is sufficient to prevent a full-blown rotation

out of EM assets," ETM Analytics economists said in a note.

"We've been warning for some time that the imprudent fiscal

environment and fundamental pressures that exist in South Africa

suggest the rand will be amongst the most susceptible to an

external shock, and this is exactly what appears to be

materializing at the moment."

The yield on the benchmark 2030 government issue

was up 12 basis points to 8.14%. 

REUTERS

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