JSE CHIEF executive Leila Fourie.
JSE CHIEF executive Leila Fourie.

Sell-off sees R4 trillion in shareholder value lost on JSE this year

By Edward West Time of article published Mar 19, 2020

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CAPE TOWN - Some R4Trillion in shareholder value has been lost on the JSE so far this year due to massive selling triggered by fears of weakening economies and global trade from the Covid-19 virus, JSE chief executive Dr Leila Fourie said yesterday.

With most South Africans’ pensions, savings and investments held in JSE shares, the financial loss to these people has been “extreme”, Fourie said in an interview yesterday.

She said the total market capitalisation of all shares on the JSE was more than R17trillion at the start of the year, and year-to-date was below R13trln.

The FTSE/JSE All Share Index (Alsi) yesterday closed 7.15percent lower at 38604.88 points.

The market was seeing “unprecedented volumes and value”, and last Friday recorded the highest number of trades in its history, with more than 760000 deals recorded, while on a normal busy day it was about 280000.

She said the JSE had to work late into the night over the past week-and-a-half to settle trades, but the JSE’s systems and staff had managed to ensure continuing smooth operations.

In addition, there had been no liquidity crunch in the market, with all market participants honouring their trade and margins and all trades proceeding “without glitches.”

She said year-to-date the Alsi was down about 27percent, resources stocks were down 35percent, and financial shares were down 32percent.

“In circumstances such as these, resource shares would normally be seen as a safe haven, but with many resource companies having China as a major market, this view has been dislocated,” she said.

The JSE does not operate in the same way as some other bourses such as the New York Stock Exchange, which suspended trading twice last week due to market volatility. Instead, each JSE share has different triggers or “speed bumps” in place on upward and downward movements, that suspends trade in the share for five minutes in the event of extreme volatility.

Fourie said the JSE would continue to function to ensure integrity of price formation and so that the free market could play out.

“On a normal day, about 30 of these triggers might activate, but in the last week and half we have had days where there have been more than 700 circuit breakers,” she said.

She said the JSE could only contemplate closing on a trading day were the market was, for instance, unable to ensure settlement of trade, or where there was unequal access to information, or different market information was being made available to market participants.

Fourie said it was likely “we will see a different world” once the Covid-19 crisis was over, judging from previous experience such as the Sars virus outbreak in 2001, which resulted in the creation of online shopping and of companies such as internet giant Tencent in China.

“The adoption of remote working and online education is likely to take hold in the future,” she said.

BUSINESS REPORT 

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