The JSE reversed early gains to close weaker on Friday in line with its global counterparts, indicating the fragility of investor sentiment despite a series of co-ordinated actions by US financial regulators to contain the fallout of the collapse of Silicon Valley Bank (SBV).
The JSE all share index lost 0.52% to 72,527.92 points, its lowest level since mid-December, reversing gains of as much as 1% earlier in the day.
Though losses were pretty mild and mainly concentrated among the big industrial stocks such as Richemont, the JSE has endured a torrid week, with the all-share losing 5% of its value.
However, gold shares were the outliers this week as they benefited from the rally in the price of bullion, which has safe-haven characteristics. The yellow metal was also boosted by a weaker dollar, with markets now expecting the US Federal Reserve to raise interest rates by 25 basis points next Wednesday, instead of the 50 basis points that they had initially anticipated.
The collapse of Silicon Valley Bank has spooked investors. “While central banks and other financial institutions have rallied quickly to contain the situation, the fear that there are other “gremlins” lurking inside the financial system has risen,” said Caroline Cremen, portfolio manager at Adviceworx.
“Unfortunately in SA, these worries were also compounded by the update from Transaction Capital, wherein they state that distressed debt within their lending arm has risen in response to the prevailing economic climate and circumstances in SA. Local investors may wonder if this is not a bellwether of things to come in 2023.”
Transaction Capital shares rebounded 31% to close at R11.50 on Friday, but were down 59% on the week.
The SA Inc stocks also fell heavily this week as concerns about the health of the US banking sector combined with the fallout of the energy crisis in SA.
However, Sasfin Wealth chief investment strategist Craig Pheiffer said in a note that there is “no expectation at this point that another global financial crisis is in the making.”
“This does not, however, imply that there won’t be further isolated bank failures, particularly of banks catering for niche markets such as cryptocurrencies and venture capital”.
In the commodity markets, Brent crude was under renewed pressure late on Friday, losing 3.64% to $71.89 per barrel, the lowest level since September 2021. The gold price was up 2.16% at $1,960.71 an ounce.
The rand was relatively steady against the dollar, but was nearly 1% weaker for the week despite growing market expectations of the US Fed policy pivot, from tightening policy rates to cutting them to shore up confidence in the financial system. The rand changed hands at $18.43 as of 6pm.