Slight recovery from Covid-19 market scare
The rand recovered to R15.64 to the dollar at 5pm after having weakened to R15.89 against the dollar in the early hours of the morning.
Markets closed sharply in the red on Friday, weighed down by significant losses in gold, platinum and retail sector stocks during the worst risk sell-off since the 2008 global financial crisis as the spread of the virus spooked investors.
Global markets are now betting that the Federal Reserve will slash rates by 50 basis points later this month.
There are also expectations that production cuts from oil organisation Opec and stimulus from global central banks might offset economic gloom from the coronavirus outbreak.
Wichard Cilliers, the head of dealing at TreasuryOne, said the markets would need to closely monitor the coronavirus and the news surrounding the spread.
“Fears that the coronavirus could push the global economy into recession saw markets tumble on Friday,” Cilliers said.
“(But) for now the rand will continue on its roller-coaster ride as we get beaten around in this time of uncertainty.”
Trade among countries has been significantly hampered by a number of blockages due to increased concerns about the impact of the virus spreading globally.
As of last week, there had been 83000 cases of the new coronavirus and 2858 deaths globally, the majority of them in China, South Africa’s largest trading partner.
In its Global Macro Outlook 2020-21 update last week, Moody’s Investor Services said the coronavirus clouded growth outlook just as the economy was showing signs of stabilisation.
Stocks tumbled globally. Almost R1trillion was wiped off the South African stock market last week, while the global stock market saw $6trln in value lost.
Data from the JSE yesterday showed that offshore investors sold a net R5.72billion of South African stocks last week and R9.04bn in bonds.
In other data, South Africa also posted a trade deficit of R1.87bn in January, compared with a revised trade surplus of R13.89bn in the prior month due to decreasing exports.
Chief market strategist at FXTM Hussein Sayed said the coronavirus crisis was neither a financial nor a trade one, but a health crisis.
Sayed said investors with cash might want to wait a little longer before they jump in, although markets might look attractive.
“The current crisis facing the global economy is not due to a lack of cheap liquidity, but the absence of treatment to a virus that is spreading throughout the world, and no amount of monetary stimulus will return life to normal,” Sayed said.
“It’s almost impossible to know how much further risk assets may drop, but until we get evidence of the virus being contained, any upside may prove to be a dead cat bounce and the markets are likely to continue heading down.”
Meanwhile, the Jobs Summit Presidential Working Committee chaired by President Cyril Ramaphosa yesterday received a report on South Africa’s state of preparedness as the world battles the outbreak of the coronavirus.
Ramaphosa said he was confident that South Africa’s health sector had put in place the necessary measures to manage and contain the virus should it present itself within the country.
The President has also urged ongoing vigilance at all ports of entry to ensure that the necessary precautions were undertaken to keep the country safe.