SARAH BULLEN in Johannesburg | Wednesday 5.30pm.
THE Johannesburg Stock Exchange lost 8% of its value this morning in a massive crash — but recovered somewhat in the late afternoon to close with losses of 6,21% — still one of the year’s largest falls.
At midday all indices had taken some of their worst falls on record, with the financial index plunging 8,81%, (868 points) and the all gold index falling 8% (67 points) in the day. The industrial index was 475 points down (6,92%).
Initial speculation was that Tuesday night’s bomb blast at a Cape Town restaurant was the cause of the plunge. But this appears to scratch only the surface, with dealers suggesting that the large-scale dumping of equities is the manifestation of a larger financial market crisis. One dealer said that only if the bomb blast were to usher in a full-scale war would the sceptical markets react with such vigour, suggesting the Russian rouble’s 10% fall against the dollar as a more realistic cause.
While other traders suggested that the cause might be fears over the stability of a minor local bank with international shareholders, it seems likely that a statement by Reserve Bank governor Chris Stals on Tuesday lies behind the fall.
Stals said he has no plans to cut interest rate, indicating a preference for recession over possible inflation.
Wednesday’s aggressive bear run appears to be a worldwide trend, with the Dow Jones Industrial Average currently down 1,25% and London’s FTSE down 2,5% as international markets feel a wave of nervousness swelling from Russia.
By close of markets, indices had fought back off their lows, with the all share index closing 6,21% down at 5532. The all gold and financial indices led the day’s downward charge, shedding 7,03% and 7,29% respectively to close at 780 and 9133.
The fall in equities was outstripped by the bond market’s appalling performance as the key R150 seven-year government bond rocketed to an 18,82% yield from 17,94% late Tuesday. With yields sitting at levels last seen in the mid-1980s, dealers said investors are locking in on the upside of the bond — with some investors able to lock in to a 20% yield.
The rand took a bit of a knock, falling nine cents against the dollar to R6,37 in the day’s trade, largely as a result of the other two markets’ fall.
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