Panic buying gives retail shares an unexpected, but welcome, boost

Even amid the coronavirus craziness that is hitting South African business, there are opportunities to be had – albeit probably temporary.

As consumers tore through supermarkets and retail stores on Monday 16 March and Tuesday 17 March, frantically stocking up their pantries with everything from mounds of toilet paper to piles of tinned food, the struggling Food and Drug Retailers Index on the JSE suddenly came to life.

Food and Drug Retailers Index gains 5%

After being down by around 22% so far this year, it gained by 5% on Tuesday, well ahead of the overall JSE All-Share Index rise of 2.7% on the day. Shoprite was the biggest winner, rising by 13.63%. Woolworths went up 8.25% and Pick n Pay increased by 8.63%.

Whether this is sustainable or just another instance of coronavirus-inspired craziness remains to be seen. Calmer heads will probably believe the latter, as the major retailers have already begun limiting the quantities of items that shoppers can buy.

In the United Kingdom (UK), though, supermarket shares continue to buck the widespread downward trend and are also on the rise. The Morrisons chain is up 12% and has said it plans to hire 3 500 more staff to handle the ongoing shopper rush. J Sainsbury shares are up 11% and online grocer Ocado rose by 5%

Tuesday proved a better day for other stocks on the JSE

Elsewhere on the JSE, Tuesday proved to be the stock exchange’s best day since December 2018, as global markets bounced back after a big sell-off on Monday that also impacted the South African markets.

On Tuesday, the JSE gained for the first time in five days, as investors anticipated that more governments around the world will put in place suitable measures to mitigate the ongoing impact of the virus. Among the governments that have announced stimulus packages designed to support their local economies, are Portugal, France, Spain, the United States (US), UK and New Zealand.

The rand also rose on Tuesday and proved to be the second-best performer among emerging market currencies on the day.

Turnaround from woes of Monday and previous week

This was a welcome turnaround from Monday’s woes on the JSE, which dropped 6% and endured its sixth-biggest crash since 1978.

The previous week, the JSE lost 15% of its value amid the turmoil of the coronavirus and the country’s home-grown economic woes. 

Asian markets were positive on Wednesday morning and there are hopes that the JSE will continue to improve on the back of that. However, early Wednesday morning trading on European markets was down and the JSE may instead take its lead from that.