Local shares tumble, following global sell-off of riskier assets

THE FTSE/JSE All Share Index fell 6.23 percent to 48 820 points and the Top 40 Index tumbled 6.57 percent to 43 687 points yesterday as the local market followed a global sell-off of riskier assets sparked by continuing fears over the spread of the coronavirus and the tit-for-tat war between Russia and major oil-producing nations.

The yield on benchmark 2030 government issue followed, rising 12.5 basis points to 9.18 percent as the stand-off and corona fears saw Brent crude take its biggest one-day fall in 15 years. Banking stocks took a pounding, with FirstRand succumbing 5.41 percent to R50 and Standard

Bank 4.98 percent to R142.70, while Absa fell 4.45 percent to R120.50 and Nedbank 4.45 percent to R154.

The platinum index fell 11.05 percent as Northam eased 15.29 percent to R114.36, Implats 15.01 percent to R119.84 and Amplats 2.68 percent to R922.20.

Gold stocks, which have provided a buffer as a safe haven, also retreated, with Gold Fields down 2.36 percent to R108.58, AngloGold Ashanti 1.68 percent lower at R329.01 and Harmony 0.91 percent at R62.02.

Neil Wilson, chief market analyst for Markets.com, said the oil price shock totally unnerved investors, while Italy’s decision to quarantine 16 million citizens left markets feeling like the coronavirus outbreak was out of control. He described yesterday as “Black Monday” on the markets.

“There’s a risk of losses in oil positions needing to be covered by selling down elsewhere – we’re in a vicious circle,” Wilson said. “Equity markets are hideous today, and these kind of moves are to be afraid of, as they can lead to aggressive tightening in credit that can spiral into real financial distress.

“We don’t even know what kind of impact the coronavirus will have on the economy, yet bond and equity markets are screaming recession.”

The local market followed a global scare that saw the FTSE tumble 8 percent, mining index shed 9.49 percent, with US equities threatening to see the end of their longest ever bull market after being caught in the blast from the oil bomb.

Stanlib’s chief economist, Kevin Lings, said the economic disruptions caused by coronavirus had led to a supply-side shock and a sharp fall-off in oil demand, undermining the oil price in recent weeks. He said the free fall in the oil price, combined with the continued spread of the virus internationally and the systematic downward revisions of the global growth estimates, undermined emerging markets and sparked foreign capital flows.

“Consequently, during the past couple of days the rand has weakened to above R16/$, which is a decline of almost 13 percent since the beginning of the year,” Lings said.

Citadel’s chief investment officer,

George Herman, said the sell-off in global equities and on the JSE was sizable in the past 12 months.

Herman said Citadel had gradually decreased its holdings in bonds in line with the country’s credit rating as the deterioration of South Africa’s fiscal metrics had become a source of concern.

“The reason that so many investors may be feeling particularly anxious about this latest bout of turbulence is because we haven’t experienced normal, meaningful, cyclical retracements for the past decade, as central banks have continuously flooded markets with free cash,” Herman said. “No amount of monetary or fiscal stimulation can solve a virological and logistical problem.”