South African markets took a pounding on Monday, hit by a global stocks fall and a flight from risk, with investors worried about the stability of United States and European banks.
The Johannesburg top-40 index skidded 6,12% — its biggest one-day fall in a decade — to 21 007,17 points, the lowest closing level since October 2006.
The larger all-share index fell 5,76% to 23 087,67 points.
”World markets are being decimated; this uncertainty about the bailout plan coupled with weaker metal markets, coupled by uncertainty in the currency markets [is hurting local stocks],” Tubby Goodwin, a trader at Investec Securities, said.
The international credit crisis left more casualties on Monday. Governments moved in to save banks in Europe and Citigroup announced it would buy the bulk of Wachovia’s assets and liabilities, overshadowing a proposed $700-billion US bank bailout deal.
Top central banks tried to boost the struggling financial system through more cash injections, increasing reciprocal swap lines to boost dollar liquidity.
Falling platinum prices on concern about the outlook for the automotive sector knocked local platinum shares, with Lonmin the bigger loser, dropping 15,7% to R314. The stock was also weakened by the resignation of its chief executive, Brad Mills.
Anglo Platinum, the world’s largest producer of the precious metal, was down 6,53% to R716.
The rand tumbled against the dollar on risk aversion and despite a surge in the price of gold, a key export.
The local currency was trading at 8,2225 versus the greenback at 5.45pm, 2,1% softer than its previous close in New York, after plunging to 8,2750 earlier in the session.
”Another tricky day out there in the minefield,” Absa Capital trader Duncan Howes said.
Political crisis
The rand was still driven by dollar moves and global developments, which would likely continue until there was a solution to the credit problems.
”There is still some risk aversion and the rand is feeling the brunt of it, and there is also some political uncertainty,” he said.
South Africa’s political scene was overhauled last week with the ousting of Thabo Mbeki as president in the country’s biggest political crisis since the end of apartheid in 1994.
The dollar soared against the euro after European governments were forced to nationalise operations at some banks but pared some gains on the central banks’ moves on liquidity.
The low-yielding Japanese yen, a favourite for investors seeking to dump risky assets, strengthened versus the dollar.
South African government bonds also weakened, although losses were relatively moderate compared with other asset classes, supported by lower oil prices.
The yield on the benchmark 2015 bond was up seven basis points at 8,90% compared with Friday’s close, while the 2036 yield was 10 basis points higher at 8,25%.
The yield on the two-year bond added four basis points to 9,515%.
On the bourse, mining giants and index heavyweights BHP Billiton and Anglo American fell by 10,79% to R183,74 and 9,20% to R270,48 respectively.
Insurer Old Mutual lost 10,20% to R11 and Sasol dropped 7,40% to R337,98.
Services group Bidvest, which is reconsidering its bid for packaging firm Nampak, dropped 6,04% to R101.
All top-40 shares fell during the session. —