A bloodbath like the JSE hasn’t seen in 10 years

Oil spat and health fears send markets reeling, reminiscent of 9/11 and 2008.
The JSE did not escape injury, dropping a massive 3 000 points (more than 6%) within minutes of the opening bell on Monday. Image: Moneyweb

US futures markets fell sharply early Monday morning and hit the so-called 5% ‘down limit’ – a limit that forces a halt in trading when markets move either up or down by 5%. This is done to prevent panic selling and, more unlikely, panic buying when share prices are deemed to move too fast and lose track of economic reality.

When US markets opened late afternoon South Africa time, the S&P 500 Index immediately dropped by as much and, after a trading halt, fell a total of 7% from Friday’s closing levels.

The decline followed the fall of around 10% on most world markets during the last week or so, when fears of the impact of the spread of the coronavirus sent international fund managers scurrying.

The drop on Monday followed nothing more than a few remarks from Russian President Vladimir Putin.

He indicated that he wasn’t too concerned with the oil price being at its then-lower levels of around $37 per barrel. Saudi Arabia retorted that it wasn’t worried either and was not about to prop up the oil price with production cuts.

That was all speculators and investors needed to reconsider their outlook for the oil price in an environment marred by an oversupply of oil and a long list of uncertainties with regards to economic growth.

If the trade war between China and the US had weakened the patient, the coronavirus and the fight about oil production sent the sufferer straight to intensive care – without passing through the pathology laboratory for tests.

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The fall in US and international share prices is, thus far, similar to the market crash following the September 2001 terrorist attacks on the Twin Towers in New York.

As Investopedia puts it: “On the first day of NYSE trading after 9/11, the market fell 684 points, a 7.1% decline and setting a record for the biggest loss in exchange history for one trading day.

“At the close of trading that Friday, ending a week that saw the biggest losses in NYSE history, the Dow Jones was down almost 1 370 points, representing a loss of over 14%. The S&P index lost 11.6%.”

Six years later, by the end of September 2008, the US market set a new record by falling 777 points when several US banks went bankrupt due to reckless lending and a nationwide property market meltdown.

Now we are here again.

The JSE did not escape injury, not in 2001 or 2008, and not this week.

It dropped a massive 3 000 points – more than 6% – within minutes of the opening bell on Monday morning. In all, the JSE Top 40 Index has dropped more than 8 000 points since its recent high of 52 212 points on February 19, to close at 43 892 on Monday afternoon in anticipation of a weak trading session in New York.

The biggest casualty was Sasol, due to the drop of around 25% in the oil price. Sasol opened up more than 40% lower and ended the day nearly 47% lower at R85.35 – and everybody thought it was a crisis when the share dropped to below R200 a few weeks ago.

BHP fell by nearly 16% on Monday due to its oil and energy interests, to close at just below R233 per share – nearly 30% lower than its recent high of R329 just two weeks ago.

MTN Group dropped 15%, as investors focused on its foreign currency debt and the decline in the rand to above R16 per dollar, while Anglo American lost 10% on fears of a global economic slowdown. Other large shares dropped by between 5% and 8% on Monday..

BHP, MTN and Anglo American share price movement in the past 30 days

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So much money was pumped into the economies worldwide ever after 2008, mostly driving shares up, nothing new, more money will thrown into the markets, same old same. Cheap oil is good for economic growth. Simply emotions too hot to be realistic, overcapacity worldwide in all sectors will keep prices vulnerable. It is not the oil prices, nor the Russians or the virus, too much cheap money for so long drove the share prices up, this is simply cooling down. Much more cheap money will start to flow and the same will happen, the printing of cheap money and overcapacity in production will continue.
Stay long, keep calm, read a book, take a walk, live a simple life, if greed was not part of your investment plans, stay on course and wait, markets are still way up from previous crashes.

Fortunately for those waiting for a deep fall in share prices, the central bankers do not have much more left in their toy boxes. Very annoying that the nappies came out to protect bankers and fund managers against capitalism!

The S&P needs to get closer to 2000 – 2100 for share prices to be more realistic. A thousand unicorns and rubbish companies that will never generate a fraction of their ‘value’ in actual operating cashflow need to get wiped out.

“Keep calm, read a book”… stay indoors, wash your hands.

…And don’t touch the stuff in the supermarkets and don’t pick your nose.

Just another bloodbath.

Depending how long you have been in the market you will remember 1987, 1998 2008 and now this little correction.

I made a bundle in 1987, De beers corrected to R25 a year later was R125…….

Aaah 1987 …. we made enough to spend a year travelling around Europe and the UK in hotels and a Kombi. But then the Rand was two to the Pound and one to the Dollar.

Sigh ….

Not good if your income is generated by these markets.

I am in the position of generating my income from my carefully saved money, investing in what I thought was a balanced portfolio. I have no advice.

….I was about to say “own physical gold”…but that wouldn’t work either: (i) if you keep the gold on site at home, you would’ve lost it during past burglaries, or (ii) if kept at storage at financial institution, the insurance costs will eat into returns, especially during years when gold price lies idle.

It’s a now win situation. If SARS doesn’t get to it, some bloody Asian virus will..

Covid-19 and the drop in the oil price are just the snowflakes that caused the avalanche. Th underlying unstable snow mass that has now come tumbling down in a massive avalanche was caused by 3 decades of criminally reckless central bank Keynesian policies, the monetization of, now unpayable, debt, the unbridled borrowing by global governments to dish out freebies to every Dick, Tom and Harry in a desperate effort to retain power and the happy go lucky gambling boys and girls at the Wall Street casino. What’s next? Let us pray its not the (estimated) 1.2-1.5 quadrillion dollar derivatives market that becomes unstuck

Well said. The Fed is panicking and pretty much spent all their ammo, the PPT stepped in yesterday and will do the same today. This easy money really is like a drug, with markets forever needing more or they throw a tantrum.

The fears of Coronavirus aside, now that OIL dropped to $30-odd, the markets see it as bad.

So the opposite is supposed to apply as well: oil above $100pb must thus be GOOD for markets to improve, right?

Sustained low oil price will be deflationary in countries that must import oil. It should factor through as lower transport costs, and lower pressure on goods/services/food/groceries. Even air travel should benefit….but now the world is afraid of a virus that has the almost same fatality rate as SA’s road death stats.

Even I took some Sasol pain within one’s portfolio, but the pain would dissolve as you drive your large SUV or double-cab down the road 🙂

The (fear of) the” disease made in China”…which causes people to reduce economic activity, that’s the real problem. Create fear or uncertainty & you move markets (like SA’s capital flight since Zuma/Nenegate).

The tree biggest issues in this perfect storm (in this order):
– ANC
– Corona
– Oil war

Having a lunatic in the White House, only concerned with his reelection is another factor to spook markets.

Lunatic in the White House or not, nothing trumps the ANC for value destruction.

The JSE has existed for 133 years. The worst performance in 10 years is a poor measure of comparison. 10 years is too short a period of time to make this info significant as an overall measure of performance.

Did anyone keep some cash on call at 6% for just this sort of opportunity? Animal spirits have taken over and some stocks are really cheap. But there is also always a reason why something is cheap….

All this bluster has done nothing to the price of Clicks … up 38% in the last 12 months.

A little bloodletting is both necessary and welcome for global equity markets that have been on an unjustified tear for much of the last decade. Investors / traders need to disabuse themselves of the notion that equity markets go up. The vast majority of high single or double digit returns in US equity markets since 1870 have occurred in the last 3 decades. Caveat Emptor

There might be an apparent lunatic in the white house, but the markets and real money think otherwise. Since he was sworn in the DOW doubled and the economy is on a relative tear. International and local heavy weight investors in the US were far more terrified of Sanders in the white house than trump with his nut job Marxist agenda. Biden is clearly senile and suffering from dementia this is not opinion just look at 3 dozen you tube videos. My opinion is Bernie will be hoofed out again he is just too extreme like AOC, i think he is a good person but just clueless as to how the real economy works. Biden is a corrupt fool with what looks like dementia he is being kept around to keep Bernie in the back ground.

When the rubber hits the road they will both be hoofed – Biden for likely medical reasons and Bernie will have insufficient votes – then what … hmmm … do not be surprised if Hillary enters stage left as a last minute draft to save the Titanic (DNC) of course i think this is to simplified there will be a couple of bizarre twists i am sure.

Again i have to mention the bizarre reaction, OVER reaction massive hype, alleged panic of this corona virus – yes i expect to get lambasted by those that actually think this is a serious issue. I travel a lot, planes, trains and many social places globally, everyone is sick of this, the coversations you over hear are … along the lines of what crap, or OMG if i hear one more statistic of a 92 year old man dying in stoke on trent and he had emphysema … i will go bat sh!t … he would have kicked the bucket if he got a mild cold. Now we have Boris in a very solemn address saying many many more families will lose there loved ones before their time … my God, are leaders, real leaders not supposed to calm the public, there i think 12 deaths in 3 weeks in the UK … stop the press and what 600 infections x that by 10 for normal flu deaths and infections in the same period … but nout anywhere will you see a media new outlet of any form giving us this context – why.

Why are the global governments pushing this nothing burger so hard? With the aid of the press. 5 years ago, they would have given this out break a fancy name, maybe even like Wuhan flu and said to the general public, please note as is the norm every few years we have a more severe flu outbreak than usual, this is one of those years, please take extra vitamins, eat well and take normal precautions, keep kids out schools etc. This was what is was like for most of my life … but no, this is being treated like WORLD WAR Z, or worst with an ebola air borne hybrid chucked in and bubonic plague. I see India closed the country today – wow! If you live in the EU you are being self isolated basically … how long will the governments keep this crap up? They must have an agenda as they generally are not idiots, the old saying never let a good crisis go to waste or in this case a manufactured one – the comment earlier with stock markets and commodities and very high levels it was not hard to trigger a panic. Standby for further draconian measures coming to a country or continent near you.

why will the site not let me comment?

There might be an apparent lunatic in the white house, but the markets and real money think otherwise. Since he was sworn in the DOW doubled and the economy is on a relative tear. International and local heavy weight investors in the US were far more terrified of Sanders in the white house than trump with his nut job Marxist agenda. Biden is clearly senile and suffering from dementia this is not opinion just look at 3 dozen you tube videos. My opinion is Bernie will be hoofed out again he is just too extreme like AOC, i think he is a good person but just clueless as to how the real economy works. Biden is a corrupt fool with what looks like dementia he is being kept around to keep Bernie in the back ground.

You might have left one of the fields blank, or be posting too quickly

I am getting this message when i try and post, could an erudite individual or moneyweb advise why this might be – my typing speed does not allow me to post too fast – i have checked there is nothing derogatory in my post it just will not go, i was not aware there a field to leave blank.

Dankie

If I calculate correctly since January S&P down 17%, ZAR down 17%. Had I been 100% invested in the S&P I would be at the same level now as in January.

Instead I’m down about 9%. What next? Still trying to diversify but it’s really difficult with a weak rand.

End of comments.

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