Sasol was the biggest loser on Wednesday, as a consequence of its high debt and delays in getting its Lake Charles Chemicals Project in the US operational.
The once-strong company’s share price fell 26.44% to R52.72, knocking it further down from its 61.92% drop in the past seven days.
The decline was accelerated by the sharp drop in the oil price. Sunday’s crash spooked markets that were already panicked by the impact of the coronavirus outbreak on the global economy and the demand for oil. The price of Brent crude dropped nearly 30% after oil producers failed to reach agreement on cuts.
Market watcher David Shapiro of Sasfin says it’s very difficult right now to get a grip on what is in investors’ minds. “Nobody understands why it has to be like this.”
“We can’t really get to the bottom of what is really driving people’s decision-making, and to really get a grip on what their actual fears are.
“We have never experienced anything in our lives like this before,” says Shapiro.
What he finds most concerning about Sasol however is its lack of communication to investors.
‘We have heard nothing’
“What worries me is that we have heard nothing from the company. We’ve heard nothing from the stock exchange.
“There has been no reporting or communication … the market capitalisation of Sasol today is R33 billion, which is insane. We’ve just come from R450 billion.
“It is creating a massive amount of destruction,” says Shapiro.
There is a lot of confusion about what impact the coronavirus is going to have on the global economy, and against that backdrop people are incredibly nervous. Restrictions on people’s movements and flight cancellations are a hindrance to the flow of goods and services globally. “It is something I think the world has never had to cope with.”
Shapiro adds: “The fundamentals have very little bearing and the policies that are being implemented by governments do not really make any difference. Because if you are going to lock up yourself in the room, what difference will it make if interest rates are reduced?”
Earlier this month the US Federal Reserve had an emergency rate cut, slashing its benchmark interest rate by 50 basis points in response to growing fears around the coronavirus.
“It is really difficult, and I think the policies should be towards helping businesses cope with what is likely to happen in the next few months if the virus gets hold of us or grips the world,” says Shapiro.
He believes the rand is going to be a victim of global market fears, with more investors moving towards the dollar as a ‘safe haven’.