Downward spiral on the JSE continues
JOHANNESBURG - The JSE continued its downward spiral yesterday after yet another bloodbath that saw stocks tumble and the rand weakening against the dollar following the government’s decision to impose travel bans on foreign nationals from coronavirus (Covid-19) highrisk countries.
The JSE All Share Index plummeted to the lowest in more than six years, falling 11.98 percent to 38 888 points as stringent measures spooked the jittery investors while the Top40 Index tumbled 11.98 percent at 34 747 points to take its total losses in the past seven days to 17.1 percent.
Banking stocks followed suit, falling 9.06 percent to 6 179.81 points, with Standard Bank down 9.96 percent to R119, FirstRand 9.66 percent lower to R44.72, Absa 5.98 percent down to R110.60, and Nedbank 10.54 percent down to R130.39. FXTM’s Lukman Otunuga said investors remained on edge over the growing uncertainty and mounting questions.
“A sense of unease over what the travel ban means for South Africa’s fragile economy at such critical periods is fuelling risk aversion,” Otunuga said.
“Investors are questioning if this will hit economic growth and what measures are in place to limit downside shocks.” President Cyril Ramaphosa on Sunday declared a national state of disaster over Covid-19, and announced halting flights, closure of schools, mandatory testing for South African nationals returning from affected countries. Investec’s chief economist Annabel Bishop said the virus has rattled the country’s already fragile economy. Bishop said the situation was expected to continue the downslide alongside global markets that were reacting to the US Fed cut that only increased fear.
“We now forecast 0.1 percent yearon-year for South Africa’s economic growth in 2020, which will negatively impact household finances, and so further suppress consumer confidence in 2020,” Bishop said. “We could drop our GDP forecast further, to a recession for the year of 2020, should the global and local outlook worsen.” Finance Minister Tito Mboweni said the National Treasury had a co-ordinating working group to deal with the financial impact of Covid-19, adding that funds from the National Disaster Fund would be made available. Otunuga said the economy was now looking for salvation from a possible 25 basis points reduction in the interest rate by the SA Reserve Bank’s Monetary Policy Committee on Thursday.
He said the lower rate was, however, unlikely to persuade businesses to invest or households to save in the middle of the coronavirus crisis. “The mood across local markets is likely to remain depressed amid the uncertainty which may result in a weaker rand and stocks declining further in the week ahead,” he said. The rand traded 2.53 percent weaker at R16.69 against the dollar, and is expected to drop further in the upcoming weeks as Covid-19 panic sets in.
Retail stocks also took a hammering, slicing off 9.04 percent to 3 764.55 points while mining declined 7.30 percent to 28 424 points and resources 7.57 percent to 17 338.98 points. Mergence Investment analyst Nolwandle Mthombeni said the JSE was taking cues from global markets’ reaction to the US Fed cut that only increased investor fears.