South African stocks lose close to 2% as emerging markets rally dissipates

The Johannesburg Stock Exchange’s All-Share index closed 1.7% lower at 46,690 points, while the blue-chip top-40 index slipped 1.88% to 42,772 points.

Picture: jse.co.za

JOHANNESBURG - South Africa’s stock market fell almost 2% on Wednesday, as the disappearance of investor optimism that had boosted emerging markets combined with a drop in business confidence to a seven-month low.

The Johannesburg Stock Exchange’s All-Share index closed 1.7% lower at 46,690 points, while the blue-chip top-40 index slipped 1.88% to 42,772 points.

Emerging market stocks and currencies around the world retreated on Wednesday, marking the end of a two-day rally driven by hopes that the coronavirus was peaking in its European and US epicentres.

But as COVID-19 death tolls continued to rise and with deep economic cracks becoming increasingly apparent, investors turned pessimistic.

“The positive sentiment that prevailed in markets for most of yesterday dissipated late in New York. The slowing rate of spread of the coronavirus was tempered by the rising number of deaths which turned markets cautious,” said Andre Botha, a senior dealer at TreasuryONE.

Locally, South Africa’s business confidence index also dropped to its lowest in seven months, with the country’s already shrinking economy expected to take a massive hit from a three-week lockdown implemented to stem the spread of the virus in the country.

Stocks that tend to suffer when economic sentiment turns negative were among those leading the blue-chip index lower, such as financial services firms.

The country’s rand however regained some earlier losses to stand 0.61% stronger at 18.2010 against the dollar by 1506 GMT.

Bonds were weaker, with the yield on the government issue due in 2030 adding 2 basis points to 10.98%.