Covid-19 and the JSE: Two Days into The State of Disaster

16 and 17 March 2020

Wednesday, March 18, and two days have passed since president Ramaphosa has declared a national state of disaster on March 15.

 

What was the reaction on the JSE?

 

Monday, March 16

The JSE All Share Index (ALSI) was immediately down by 8% when trading started on Monday, the first day after the state of disaster declaration. At one stage, during hectic and panic-driven trading, the index dropped by 12%.

The JSE responded to world-wide panic on stock markets after the Federal Reserve Board of the USA (Fed) cut its interest rate by 1% percentage point to zero. The intention of the Fed is to boost the USA economy during the Covid-19 pandemic.

However, the Fed’s action unnerved the markets and caused more fear and uncertainty. Investors remained uncertain and edgy about the spread of the coronavirus and its impact on economies.

“The Fed’s action spooked the market. Investors are worried that the Fed took such drastic action because it has information about the coronavirus impact that the market may not yet reflect,” fin24 reported on March 16.

Apparently, the JSE hasn’t responded very positively yet, to the drastic measures announced on March 15, by the president. The promise of “a comprehensive package of interventions” to alleviate the anticipated impact of the coronavirus on the country’s economy, also hasn’t calmed investors yet.

The ALSI closed at 40 500 points on March 16. A significant 3 678 points or 8,33% down from close on March 13. This was the sixth biggest one-day crash on record for the JSE and only 5 days after the fourth biggest fall of 9,7% on March 11. This was after the World Health Organisation (WHO) declared Covid-19 a pandemic. The biggest crash was on 19 October 1987 when the stock market plunged by 11,7%.

Regarding share prices of companies on the JSE Top 100, excluding the Top 40:

Sasol started its slump again, a decline of 11,89% or R6.04 from R50.78 at close on March 13, while mining companies, like Exxaro (down by 11,2%), Northam Platinum (declined by 18,73%) and Harmony (fall of 9,83%), also didn’t escape the panic.

The JSE Top 40 was also not spared. It was 3 174 points or 8,04% down at close on March 16.

With regard to share prices of Top 40 companies:

The 5 biggest losers of the top 10 companies of the JSE Top 40 were: Standard Bank (9,96%), FirstRand (9,66%), AB InBev (9,29%), Naspers (8,61%) and Glencore (8,47%).                              Implats was down by 18,71% on March 16. Old Mutual lost 16,1% and closed at R11.70. March 16 was also the day on which Old Mutual published its results, which apparently didn’t impress investors.

 

Tuesday, March 17

The ALSI slightly recovered from the storm on Monday and close at 41 580 points, up by 1 080 points or 2,67%, but still 2 598 points or 5,88% down from close last week on March 13.

There was also some respite for the JSE Top 40. The index closed at 37 375 points, up by 1 073 points or 2,96%, but still a decline of 2 101 points or 5,32% from its closing level of 39 476 points on March 13.

Sasol’s share price weakened further by 17,99% or R8.05 and closed at R36.69, a massive fall of R266.79 or 87,91% from its share price of R303.48 at the start of 2020.

Investors were still not impressed with Old Mutual and its share price declined by a further 2,9% to R11.70.

After its loss on Monday, Harmony’s share price increased by 12,15% or R4.87 and closed at R44.46.

The following companies also experienced good increases in their share prices:

However, the share prices of Standard Bank, FirstRand and Naspers continued to decline on March 17.