Independent on Saturday

SHARE MARKET SHRUGS OFF UNREST-RELATED LOSSES

IF YOU had kept your eye on the share market over the past two weeks, you would hardly say that South Africa had experienced its worst riots in the post-apartheid era, resulting in billions of rands in losses, hurting an economy already weakened by the Covid-19 pandemic.

The FTSE/JSE All Share Index maintained its upward momentum on Monday and Tuesday last week, to reach 67 897 points, before faltering on Wednesday. It had dropped by 4.5% by the end of the week, but this week, by the time of writing, had almost fully recouped that loss and was standing at about 67 000 points.

Shoprite had more than 200 stores plundered, including 119 supermarkets under the Shoprite, Checkers and USave banners. Its share price dropped by 4% on Tuesday last week, but has partially recovered since then. Lewis said 58 of its stores were vandalised and looted, yet its share price was unaffected, and it is trading at prepandemic levels.

Old Mutual Investment Group chief economist Johann Els, in his weekly commentary, said last week’s events could potentially affect growth and inflation, but this was likely to be short-lived and should not change the improved medium-term growth outlook, nor lead to a changed inflation trajectory. “Rebuilding and restocking will boost economic activity, and the reopening of supply chains should help ease any price pressures. While confidence could be negatively impacted, structural strengths remain in place,” Els said.

Nema Ramkhelawan-Bhana, cohead of institutional sales and research at Rand Merchant Bank, in the bank’s market update this week, said: “As the extent of damage from last week’s events becomes clearer, we will be able to discern short- and long-run impacts on productivity and potential growth. For now, equities have bounced back … retail stocks remain under pressure, but prospects aren’t as dire as thought.

“Bonds are still sensitive to news flow pertaining to the unrest. Despite consistent inflows, bond yields are progressively steepening, albeit very slowly, responding more readily to sentiment over local events.”

Old Mutual Wealth investment strategists Izak Odendaal and Dave Mohr, in their weekly investment update, “The Madness of Crowds”, remind us that while retail is an important sector, at about 7% of gross domestic product, the economy is “much bigger than its shops and malls. South Africa is a R5 trillion economy, some of it informal and fragile, but much of it sophisticated, flexible and robust.”

Odendaal and Mohr say activity is likely to rebound fairly quickly: people still need to buy food, clothing and other household items. “While it is easy to overstate the short-term damage, it is also possible to underestimate the long-term consequences. These are likely to extend well beyond the retail sector, dealing a blow to already fragile business and consumer confidence,” they say, adding that the blow can be softened if the government deals decisively with the violence and adapts its policies to boost the economy.

TRAVEL INSIDER

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2021-07-24T07:00:00.0000000Z

2021-07-24T07:00:00.0000000Z

http://independentonsaturday.pressreader.com/article/282187949045163

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