March 2020 will officially be known as the month that ended the longest bull-market run in history (2009 – 2020). Twenty-two days (from 19 Feb) was all it took for the S&P 500 to drop 30% from it’s record high, making it the fastest drop of this magnitude in history. European shares plunged more than 20% for the worst three months since 1987 (Spain lost 30%) while China’s Shanghai Composite lost 10% & Tokyo’s Topix fell almost 20% in its worst three months since 2008. Globally, investors further shed equities and riskier instruments in their portfolios in search of reducing volatility. Increased fears surrounding the COVID-19 pandemic introduced unprecedented levels of uncertainty into the market leading to mispricing. As a South African investing offshore, global bonds were the place to be as the asset class saw a Rand return of 11% in March. The oil price also came under pressure in the first week of March due to the price war between Saudi Arabia and Russia who both increased their supply to the market; analysts expect oil prices to drop further as demand is now being ‘held hostage’ by COVID-19. The pandemic has now reached at least 180 countries across the globe seeing many of these countries going into a state of ‘lockdown’. On the 24th of March president Cyril Ramaphosa announced that the country would enter its own ‘lockdown’ in an attempt to ‘flatten the curve’ and halt the spread of the disease. The perceptions of the national lockdown were mostly viewed as positive and necessary by markets, but time will tell as to what measures governments all around the globe can implement to save small businesses throughout this period. The first to be hit by the virus, China, are currently reporting encouraging signs of recovery as new cases of infections have drastically decreased and it seems that certain cities such as Shenzhen, Beijing and Shanghai are now able to come back up to quasi-normal levels of weekday activity. On Friday 27th March Moody’s credit ratings agency downgraded South Africa’s sovereign credit rating from Baa3 to Ba1 and held the negative outlook for potential future downgrades. This prompted an already weakened Rand to slump to a record breaking R18.00 to the US Dollar. The downgrade will mean that passive funds following the FTSE World Government Bond Index will have to dump SA bonds, the index is currently tracked by $3 trillion worth of funds.
The JSE All Share Index (down 12.1%) delivered another month of large negative performance in March. Financials (down 29.4%) were the worst performing sector with Resource stocks (down 12.4%) while Industrials (down 3.1%) were the least hard hit.
Mid-cap shares (down 23.7%), Large-cap (down 10.4%) and Small-cap shares (down 21.7%) all had a very bad performance in March.
The MSCI World Index ended the month down 13.2% in US Dollar terms while Emerging Market equities underperformed their Developed Market peers and ended the month down 15.4%.
Both the South African Listed Property sector (down 36.6%) and the SA REITs sector (down 37.4%) saw large losses in value.
The Rand depreciated 13.5% against the US Dollar, 13.4% against the Euro and 10.2%against the Pound Sterling.
In March the Gold price (up 1.2%) outperformed both the Platinum price (down 16.0%) and the Oil price (down 55.0%) in US Dollars.
