South African bank stocks plunged by the most on record as a battering for the rand stemming from the coronavirus crisis combined with a bleak economic outlook to send the sector tumbling.
An index of bank stocks sank 15% by the close in Johannesburg. The rand slumped as much as 2.9%, breaching its lowest level against the dollar on record, as investors priced in the probability of a central-bank rate cut Thursday to support the economy. Yields on 10-year government bonds also climbed to an all-time high.
Capitec sank 28%, the most since its 2002 market debut. FirstRand dropped 14% and Standard Bank 13%. Nedbank and Absa slid 12%. Nedbank’s slump was the steepest since 1997, while the other three banks had their worst session since December 2015.
“Bank share prices are correlated with the rand and bond prices and on the fundamental macroeconomic weakness, as you close the economy for an undetermined period of time,” said Warwick Bam, the head of research at Avior Capital Markets. “And this time, unlike in the previous financial crisis, you have both market weakness as well as a reduced ability to operate.”
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