SA equities took a beating on Thursday as the prospect of the unravelling of the government of national unity (GNU) combined with escalating global trade tension wiped off nearly R1-trillion in value.
The all share index, the broadest measure of the SA stock market performance, plunged as much as 4.5%, the biggest one-day percentage drop since 2020 when investors scrambled for cash in Covid-19 pandemic. The index closed 3.39% lower while the blue-chip top 40 index ended the session off 3.3%.
The top 40, which houses money managers’ must-haves, such as Sasol and MTN Group, largely took its cue from global market peers after US President Donald Trump sent shock waves through the global economy with the announcement of “reciprocal tariffs” including a punitive 30% aimed directly at SA goods.
SA stocks had been on an upward trajectory so far this year, brushing off the prospects of a broader trade war that could tip the global economy into recession and tension within the GNU over the budget.
The top 40 started the second quarter with record-breaking gains, building on more than nearly 10% picked up in the first three months of the year.
But the bullish sentiment soured this week after MPs passed the budget framework without the support of its key member, the DA, in a rebellion that coincided with Trump’s tightening of its trade policies.
Even though Trump spared platinum from the tariffs, producers such as Impala Platinum, Anglo American Platinum, and Sibanye-Stillwater took a pounding, falling 5%-8% on the prospect of pared-down demand from its biggest consumer in the vehicle industry due to the tariffs placed on Europe.
“We are talking about industrial metals. And if tariffs are in place, we are talking about a lower growth outlook. The tariffs are directed at end products. The reaction [of PGM stocks] is perfectly validated. If you take a deep look at autos, the US consumes a lot of PGMs,” said SBG Securities mining equities analyst Adrian Hammond at the PGM Day conference held on Thursday.
“Let’s say autos decline 10% this year because of the impact of higher prices; you’re talking about 200,000 ounces of palladium.”
Other companies that featured on the list of big losers included Sasol down almost 13% and MTN off 7%.
The rand, one of the most heavily traded emerging markets currencies, hovered at levels last seen nearly three months ago — around R18.80/$ — improving a little during Thursday’s session after dropping more than 2% against the dollar on Wednesday. It ended the day at R18.75/$, cutting its gain so far this year to 0.4%.
Citing trade experts, Reuters reported on Wednesday that Trump’s decision to impose steep tariffs on African countries heralded the end of the African Growth & Opportunity Act, a US trade initiative that provides eligible countries on the continent duty-free access to the US for products such as cars, textiles, minerals and agricultural goods.
Local political turmoil added to market anxiety. The DA’s dissent over the budget framework highlighted deep-seated fractures within the GNU, undermining market confidence and compelling forecasters to lower their GDP projections.
“The recent political tension around the disagreement on SA’s budget, and so worries around the stability of the GNU, have also negatively affected the rand. But the DA is likely to continue to wish to remain in the coalition government,” said Investec chief economist Annabel Bishop.
GDP is now expected to grow only 1.3% this year, down from an earlier forecast of 1.8%, Bishop said.
Gold, often a safe-haven asset in times of uncertainty, briefly surged to a record high above $3,160/oz.
Crude prices tumbled more than 7% on the day even though oil is exempt from the latest round of tariffs.
“While oil, gas and refined products were exempted from the measures, the broader economic impact weighed on sentiment. If economic activity slows further, crude prices could remain under pressure as energy consumption declines, particularly in industrial and transportation sectors,” said XTB’s Middle East and North Africa market analyst Milad Azar.
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