Covid-19 virus panic hits the markets hard
The sell-off saw the rand relinquishing the gains it made after the Budget on Wednesday, falling nearly 1 percent to R15.43, R19.87 against sterling and R16.94 against the euro.
The All Share Index declined 2.91 percent to 53 444.83 points, while the JSE Top 40 Index also fell 2.97 percent to 48 032.83 points.
Banking stocks followed suit with Standard Bank tumbling 7.02 percent to R150.74, Nedbank 5.76 percent to R181.70, Absa 5.01 percent to R136.99 and FirstRand 4.48 percent to R56.97.
Capitec also yielded 2.23 percent to R1 331.72 and Investec 2.02 percent to R83.88.
Only gold and resources stocks prevented what could have been the worst carnage in the market since the beginning of the year as platinum shares eased.
FXTM’s senior research analyst Lukman Otunuga said optimism over the Budget was washed away by concerns surrounding the coronavirus outbreak.
“The mood across markets is tense due to the rise of new virus cases outside China, with fears over a potential pandemic,” Otunuga said.
“Investors are avoiding riskier assets amid the caution with emerging market assets and currencies in the direct firing line.”
Stock sell-off extended across the world, putting the global benchmark on course for the lowest close since October as investors continue to fret the spread of the coronavirus.
The number of new infections outside China, the source of the outbreak, for the first time surpassed those appearing inside the country.
South Korea reported a daily spike in new cases, while Japan announced the temporary closure of all its schools.
South Korea confirmed 505 new cases yesterday, bringing the total number of infections nationwide to 1 766.
MSCI’s index of emerging market stocks fell 0.4 percent to fresh 12-week lows. But gains in mainland China stocks capped losses as China reported its slowest daily increase in coronavirus deaths in almost a month, although the number of new cases continued to rise.
“Until recently, the most likely scenario appeared to be that the virus would mainly affect China's economy, and that most of the loss would be made up over coming quarters,” said Jonas Goltermann, senior markets economist at Capital Economics.
“But the continued heavy restrictions within China and the spread of the virus across the globe challenges the assumption that the outbreak will blow over with only limited damage."
Otunuga said the appetite for the rand has diminished sharply against every other G10 major currency.
“No prisoners were taken as the JSE also tumbled more than 1.5 percent due to the lack of appetite for risk and general caution,” Otunuga said.
“With the rand already grappling with domestic risks, external threats in the form of the coronavirus outbreak, and global growth concerns may result in further weakness.
“If the rand continues to weaken, the $/R may test levels not seen since 2019 above R15.50.”
The negative sentiment was further compounded by Fitch’s description of Mboweni’s fiscal consolidation programme as unlikely to change the country’s rating from sub-investment any time soon.
The ratings agency said the Budget highlighted the severe deterioration in public finances and the long-term policy challenge of stabilising government debt.
“Fiscal metrics worsened moderately compared with the Medium-Term Budget Policy Statement in October, despite the announcement of significant expenditure cuts,” Fitch said. “Moreover, these consolidation measures rely heavily on hoped-for moderation in public sector wages.”