JSE Crashes To Same Level As In 2015 Due To Coronavirus Panic

The JSE’s wider All Share Index experienced some of its worst results in two months last Monday, finishing 4% lower on the day to 54 882 points. Resource stocks fared the worst, while the value of the Rand depreciated above the critical level of R15 against the US dollar.

The troubling performance on the JSE is a result of rising fears over the impact of global trade on the South African economy, which has been struggling to gain momentum in the midst of a volatile political environment and a stuttering Rand.

Resource companies in particular export to China, a leading economy whose demand typically sets the price for commodities. Included in the resource stocks which took a hit on the JSE were Sibanye-Stillwater (down 11.2%); iron ore, manganese and chrome producer Assore (10.9%); Anglo American Platinum (ANGPY) (down 8.5%); Anglo American (NGLOY) (down 8.4%); and Impala Platinum (IMPUF) (8.3%).

The price of crude oil futures, a key player in the South African economy, fell by $2 a barrel as investors expect demand for oil to fall. However, gold prices have soured as investors retreat to the more stable ground which this commodity offers. Solid gains were recorded for Harmony Gold (HGMCF), which grew by 7.1% to close at R59.30, Gold Fields, which gained 6.47% to close at R113.61, and AngloGold Ashanti which soared by 6.56% to close at R338.00 following the release of its half-year results.

Despite the growing uncertainty surrounding the spread of the disease, there remains a silver lining in the darkening coronavirus cloud. While global markets have displayed their typical panic at any economic volatility (one need only recall the mood surrounding the SARS virus outbreak) international investor Warren Buffet believes that the virus’ impact on the global economy can yield positive returns for those who consider short-selling strategies.

Speaking on a CNBC interview on Monday, Buffet said, ‘Who wouldn’t rather buy at a lower price than a higher price? [Investors] should want the stock market to go down, they should want to buy at a lower price.’

Using this strategy, investors sell shares in the target company and buy them back with the aim of profiting from a fall in price. Analysts have already suggested shorting some JSE shares, including Richemont, Naspers, Glencore, Kumba Iron Ore and Sappi as prime candidates.

The very unpredictability of the coronavirus could prove a boon to investors, as the moments of market overreaction which it triggers create buying opportunities in companies that will recover once the situation is brought under control. In short, those investors who identify the opportunities in short-term price overreactions may find investment openings in the long-term, allowing them to navigate the current field of uncertainty towards future gains.