The rand nearly crashed through R17/$ overnight and South African shares plummeted on Monday morning as scenes of market mayhem play out across the world.
Already unnerved by the coronavirus crisis, markets were shocked by a 30% crash in the oil price overnight after Saudi Arabia launched a price war. It announced the biggest cut in its prices in two decades after Opec failed to reach a deal to cut output. Russian refused to lower production.
By late-morning on Monday, the Brent crude oil price was down 20% to $35 a barrel. The shock oil crash wreaked havoc on fuel producer Sasol's share price, which started the day 45% lower.
The oil price slump triggered massive instability in global markets, with emerging market currencies hit hard. But the rand staged an impressive recovery - after almost breached R17/$ early on Monday, it was last trading at R15.96/$, R20.95 to a pound and R18.17 to a euro.
The JSE's all share index slumped by more than 5% by mid-morning on Monday. Asian markets ended around 6% lower, while the Australian stock exchange lost 7%. European markets were also sharply lower.
Wall Street looks set for a grim trading day. So far, the losses in American stock futures are so large that they are triggering the maximum loss limits according to exchange rules.
South African companies are bleeding out value. Mining company Glencore was down almost 13%, MTN lost 12% and South32 declined 11%. The declines were across various sectors, from miners to financial services and retailers.
Standard Bank, FirstRand and Sanlam were among financial stocks that lost more than 5% of their value shortly after the JSE opened although they started recovering during the day.
Shoprite declined by more than 7%, as did Aspen.
“It’s a combination of the real economic impact expected and sentiment turning very negative. Investors are grappling with the expected impact of the coronavirus on different companies,” said Protea Capital Management CEO, Jean Pierre Verster.
Verster said while Sasol’s decline was obviously because of the oil price, Aspen could be impacted by supply chain issues as the company struggles with the availability of active pharmaceutical ingredients in India, as well as idle production lines in China.
“Shoprite has significant exposure to African economies like Angola and Nigeria which produce oil,” he added.
Nigel Green, CEO and founder of deVere Group said a global recession is now almost inevitable this year following the stock market losses and oil price crash.
"Oil’s sharpest one-day drop since the 1991 Gulf war has further fuelled the sell-off in global stock markets that started a couple of weeks ago on fears that coronavirus is going to severely damage economic growth. Every major stock market is getting hammered as oil prices plunge due to a price war following the breakdown of Saudi Arabia’s oil-cutting alliance with Russia over the weekend," he said. Green says because these are issues that will not be resolved overnight, they can be expected to have far-reaching consequences.
Musa Makoni, a trading specialist at Purple Group, says investors are dumping stocks, which are riskier assets, in favour of bonds which are usually considered safe haven in times of global crisis.
While the gold price was flat at $1,688.oz, gold shares rallied. Harmony was up more than 7%.