Down­ward spi­ral on the JSE con­tin­ues

All Share In­dex plum­mets to its low­est level in more than six years as un­cer­tainty keeps in­vestors on edge

Pretoria News - - FRONT PAGE - SIPHELELE DLUDLA [email protected]

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.

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