JSE plummets coronavirus

Image via Adobe Stock

JSE stocks plummet following oil crash, growing coronavirus fears

If you thought the coronavirus only affected one’s health, think again. JSE stocks are also under threat.

JSE plummets coronavirus

Image via Adobe Stock

The oil price debacle and growing fears of the coronavirus have seen stocks on the Johannesburg Stock Exchange (JSE) plummet. 

The global oil price for crude has on Monday 9 March slipped to its lowest level since 1991 — that’s almost 30 years ago. A barrel now costs just under $32. 

Both Saudi Arabia and Russia are at loggerheads after it was revealed that the top oil producers must hack their output. Russia refused, and their defiance sparked a reaction from those in the Kingdom of Saudi Arabia (KSA). The Saudis have now dramatically reduced the cost of their oil, flooding the market with cheaper produce — hence the oil price plummeting. 

Here’s how the coronavirus affects the market 

According to the Daily Maverick, travel restrictions and factory shutdowns due to the coronavirus are leading to big issues for oil-producing countries. 

Just last month, investment bank ING head of commodity strategy Warren Patterson said: 

“We believe the virus’ effect on oil demand will shave some 400 000 barrels a day from global consumption growth, taking us to the lowest level in nearly a decade”. 

A report by business data and analytics company Dun and Bradstreet suggested that 51 000 companies around the world have one or more direct or Tier 1 suppliers in the impacted region in China, and at least five million companies (938 of the Fortune 1 000) around the world have one or more Tier 2 suppliers in the impacted region.

As it stands, the coronavirus is no longer limited to China. The virus has spread to 109 countries, including South Africa. 

JSE takes a knock 

The oil price had already been under pressure due to the spread of the coronavirus.

There have also been widespread losses on the JSE, with the all-share index losing more than 5% following fears of the fast-spreading coronavirus, according to EWN

Mining stocks also took a hit as silver, palladium, platinum and gold prices fell. The mining index slumped with 7.14%. The rand has also lost major ground to the dollar, recovering to just under R16 to the American greenback.

According to a study by academics Jong-Wha Lee and Warwick J McKibbin of the 2002 to 2003 SARS outbreak, the total economic loss was around $40 billion (R575.8 billion). Another study estimated that the total gross domestic product (GDP) of the world had decreased by 0.1% as a result.