South African markets reeled on Friday, caught up in a global flight from risky assets sparked by credit worries, with stocks falling nearly 4% and bonds sliding.
”Traders must be placed on suicide watch today [Friday], as the [stock] market is expected to bleed heavily during the day,” said Efficient Research in a note.
The rand currency was steady after losing more than 2% to the dollar on Thursday, a public holiday in South Africa.
The JSE has shed about R140-billion in market capitalisation since Wednesday’s close, with Investec and Standard Bank leading the market south amid subprime concerns after BNP Paribas, France’s biggest bank, froze three funds that are invested in US subprime mortgages.
At 07h55GMT, investment banking and asset management house Investec was 7,57% lower and Standard Bank had tumbled 6,06%.
Heavyweight miner Anglo American fell 3,64% with rival BHP Billiton shedding 5,39%.
A Johannesburg-based trader said the market plunge was directly linked to US subprime fears.
”There is nothing more to this and it could go on for a long while, as long as a month. There is no knowing for sure,” the trader added.
The JSE Securities Exchange’s blue chip Top-40 index shed 3,61% after closing 3,5 % higher on Wednesday, while the broader all-share index dropped 3,35 percent, playing catch-up after Thursday’s global markets rout.
The JSE banking sector was 5,32% weaker, with Absa 4,49% down and Nedbank 4,12% weaker.
South Africa’s rand recouped some losses after Thursday’s slide, while bond yields jumped as investors spurned riskier assets.
The currency was trading at 7,1669 to the dollar, from a New York close of 7,18 at 08h00 GMT.
”We’ve seen a number of currencies weakening up as a consequence, such as the Turkish lira, and the rand has followed suit. There’s been a significant reaction in the market,” said Leon Myburgh, Citigroup sub-Saharan Africa specialist.
”I believe equities will be substantially weakened today.”
The yield on the heavily traded 2010 benchmark government bond was up 14,5 basis points at 9,34% from the previous close, and the benchmark 2015 added 12,5 basis points to 8,60%.
”Local yields opened 14 basis points weaker on the back of the currency weakness overnight. The market is a bit nervous and will remain volatile and negative, possibly for the next week,” a Johannesburg-based bond trader said. — Reuters