JSE faces downgrade turmoil
The JSE, which on Friday ended a run of three successive gains, could have a rough ride on Monday with SA having lost its last remaining investmentgrade credit rating.
Moody’s Investors Service issued its review after close of trade on Friday, moving SA one step down to Ba1. SA is now noninvestment grade with all the three major ratings companies.
The downgrade may lead to billions of rand being pulled from SA’s markets as its bonds fall out of key indices used by foreign investors, who hold about 37%, or R800bn, of the market, for benchmarking purposes. The potential for forced sales had kept SA bonds under pressure even before the rapid spread of the coronavirus. Market dislocations pushed yields to record highs above 12%, before the Reserve Bank restored a semblance of calm with liquidity-injection programmes.
Yields, which move inversely to prices, are still near historic highs with that on the R2030 rising 21 basis points to 11.69% on Friday.
The local bourse fell with European and US markets, despite many stimulus measures taken by central banks to mitigate Covid-19’s effects.
“Various support measures from governments and central banks around the world, with the huge packages in the US [last] week alone, are helping alleviate investor concerns, but ... we still don’t know how ugly the situation is going to get or how bad and long the economy will suffer,” said Oanda senior market analyst Craig Erlam.
The JSE all share fell 4.66% to 42,946.83 points and the top 40 4.71% on Friday. But the all share gained 6.64% for the week as stimulus packages lifted market sentiment. Banks dropped 11.69% on Friday and gold miners 14.39%. Capitec Bank fell 17.78% to R850, Nedbank 11.89% to R79.56, and Absa 10.76% to R71.99, Standard Bank 10.75% to R99.19 and FirstRand 10.56% to R38.64.
At 5.30pm, the rand had weakened 1.35% to R17.5561 a dollar, 1.36% to R19.3610 a euro and 2.84% to R21.6424 a pound. The euro was flat at $1.10331. Shortly after the JSE closed, the Dow was down 3.41% at 21,783.57 points. The FTSE 100 fell 5.43%, France’s CAC 40 4.32% and Germany’s DAX 30 3.13%.
The Shanghai composite firmed 0.26%, Hong Kong’s Hang Seng 0.56% and Japan’s Nikkei 225 3.88%. Gold eased 0.48% to $1,621.36 while platinum added 0.97% to $741.40. Brent crude fell 7.47% to $24.64 a barrel.