How The South African Stock Market Crash Can Affect You
The South African stock market was already in shambles before the spread of the Coronavirus, but due to the president declaring a nationwide lockdown to curb COVID-19 cases in the country, the stock market in our country suffered an expected but still terrible blow.
The South African All-Share index JSE/FTSE was having difficulty rising in the market since 1997 and slowed down tremendously in 2008 because of the global financial crisis, but it fell a whopping 11% in Johannesburg, the steepest fall recorded in the last decade.
Naspers, South Africa’s largest stock also fell 11% and had the most impact on our market. Richemont also fell 12%, confirming everyone’s fear about the country’s struggling economy going into an ultimate meltdown.
It is interesting however to note that the South African stock market is not the only one that’s struggling in the pandemic. The United States Of America (USA) has officially gone into recession and experts suggest that top economies in the world including China, India, UK, and Germany are likely to follow.
How Was The Global Market Affected When The Outbreak Started?
From March 16 the global stock market suffered an acute crash as panic ensued amongst investors and minor stockholders due to WHO (World Health Organization) declaring a pandemic of Coronavirus on March 11. The S&P500 reported the biggest fall since 1987 as many businesses were forced to either be shut down or operate on a limit due to travel restrictions and social distancing rules. The panic however reduced in the following 2 months and stocks restored their value after the 60 day period in June.
How Has the Coronavirus Crisis Affected South African Stocks?
On 2020’ infamous Black Monday i.e 9th March 2020 that was instigated by mass panic among the world’s entire population, Oil shares around the globe fell by 30% as Saudi Arabia undercut its competitors (Russia and USA) to provide cheaper oil, and the South African JSE’s All-Share index fell by more than 6%. This was registered under the top 14 biggest falls of stock all around the world and by 12th March, the JSE was down by 9.7%. Such a fall is enough to cripple our economy for a substantial amount of time.
Sasol suffered the steepest fall of 15% in March and was termed as the worst performer across all emerging markets. These two crashes all came within a week and were termed as the biggest crashes the JSE has suffered due to the Coronavirus crisis.
Was Any Other Country Also Affected As Severely As South Africa?
As mentioned before, the global stock market suffered a huge amount during the initial stages of the pandemic, but it is gradually trying to catch up to its earlier pace. Although due to some major changes that have been made around the world, some sectors of the market suffered more than others and are still diving deeper into the negative category.
Due to restrictions on travels and that almost all automobiles essentially coming to a stop, US Oil shares lost value for the first time in April 2020, causing the country to go into a recession. The Brent Crude crashed by 24% to 33.36$ and US Oil was dropped by 34%, being reduced to $27.34.
This was caused by a bidding war between Russia, the US, and Saudi Arabia for Oil supply with Saudi Arabia undercutting its competitors and causing a massive fall in US Oil’s share prices. This downfall in the US economy will have effects on the global market as well, including the South African market.
Did Some Stocks Benefit Due To The Lockdown?
Although the stock market crashed due to the Coronavirus panic, many businesses have boomed. The IT industry is now flusher than ever as most of the workforce is indulging in work from home.
Since people don’t want to step out, after the little bubble crash of the market delivery businesses are also booming.
Not to mention the entertainment industry. People are worried sick and feel bloated sitting at home so they are looking for entertainment. Film producers that were crying for theatres to not be closed down are now counting their millions of views on an online platform.
The spread of Coronavirus and the subsequent lockdown has not completely destroyed every stock in existence. It has affected each business individually. So if you are also worried sick of the market crashing, invest in those parts of the market that are flourishing and will continue to flourish. Vaccine companies are trading stocks at a rising value by the minute while giant automobile industries are dying. It all comes up to you in the way you let the Coronavirus crisis affect you.
The 11-year-old bull market has finally been converted to a bear one, and it is a great opportunity for you to invest in stocks by taking advantage of mass panic selling across the globe.
Which Stocks Should You Invest In?
As crazy as it sounds, investing in a falling stock would be a very wise decision. Panic selling has caused stocks such as those of Ocean cruisers and restaurant cafes to go down severely, but as we move astonishingly closer to a vaccine, these giant corporations will be back on their feet in no time. Investing in a heavyweight stock that has lost its value due to restrictions posed by the Coronavirus is a risk worth taking. A drop in the US Oil shares has caused its entire country to go into recession, but when travel restrictions are lifted the stock would skyrocket due to a sudden increase in demand.
A wise, painful decision taken in the present is a happy, fruitful memory in the future.
Who Is Jerry Mononela?
Jerry Mononela is a private accountant who offers accounting services as well as financial advice in the city of Tshwane, Johannesburg. I have accounting experience of 9 years and counting and I love to write about finance.
Written By Jerry Mononela