SA stock market, rand drop amid virus resurgence

Shares on the Johannesburg Stock Exchange (JSE) fell sharply on Friday, giving up gains made earlier in the week, amid concerns that rising coronavirus cases around the world could delay economic recovery.

The benchmark All-Share Index dropped by around 2% in afternoon trade, losing ground regained on Wednesday and sending it back to levels seen a day earlier, when the stock markets topped off a six-day losing streak.

However it recovered slightly to close 1.34% lower at 53,587 points. The blue-chip Top 40 index was 1.16% lower at 49,548 points.

The broad-based rout, which saw shares from real estate to technology tank, was led by index heavyweight Naspers Ltd , down about 4% in afternoon trade.

Naspers, along with subsidiary Prosus, hold a weight of almost a quarter in major South African indices.

Its decline was due to foreign investors distancing themselves from JSE-listed companies, put off by growing worries about the impact of a second wave of coronavirus in many countries and the imposition of restrictions to stem it, said Stephen Meintjes, head of research at Momentum Securities.

“Unless the uncertainty clears, the weakness will continue,” he said.

South Africa’s rand also slipped way past the sentimental R17 per dollar mark on Friday, paring gains seen in early trade as rising coronavirus cases in Europe dampened hopes of faster economic recovery and moved investors away from riskier currencies.

At 1448 GMT the rand was 1.28% down at R17.15 per dollar, following a close of R16.94 overnight in New York in low volume trade with local markets closed for a national holiday.

After rallying to a six-month high of R16.09 last Friday, the rand and other risk assets have reversed course. It has weakened more than 6% as fears of a second wave of Covid-19 infections in Europe rattled investor sentiment.

“Another driver of this week’s risk-off frenzy has been the realisation that the Fed stimulus the market has become so accustomed to in recent months will eventually reach an end,” said economists at ETM Analytics.

Bonds inched lower, with the yield on the benchmark 2030 government issue up slightly to 9.525%.