Money and Markets

SA shares just suffered another big crash – here’s where history says the JSE could be in a year

Business Insider SA

The JSE's all share index. Source: TimBukOne

  • The JSE lost another 8% on Monday - its sixth biggest crash since 1978. This is the third crash for the record books in a week.
  • Looking at the JSE's 20 biggest crashes, the market mostly recovered within a year.
  • But this was not the case with the two biggest crashes, and after the Great Depression, global markets took 25 years to reach previous peaks.
  • For more stories, go to Business Insider's home page.  

Monday was another wild day on the JSE, which at one point suffered a loss of 12%. It ended the day 8.3% lower, which was the sixth biggest loss since 1978.

Last week, the JSE lost 15% of its value – and suffered two of its biggest crashes in the past forty years. On Monday, the JSE’s all share index dropped by more than 6%, while on Thursday the market lost 9.7%.

The market will at some point recover from the coronavirus fall-out - but how long will it take?  

The market information platform TimBukOne compiled data that tracked where the JSE was a month, and a year, after its twenty biggest crashes. The good news is that in the majority of instances, the market was higher - often by a considerable margin - a year later. 

The more sobering news is that this was not the case with the biggest two JSE crashes. In 1987 and 1997, the market continued to fall. In the US, Wall Street only recovered after four years following both the financial crisis in 2008 and the tech bubble crash in the 2000s. 

And it sometimes takes a much longer time: After the Great Depression, it took global markets 25 years to return to their previous peaks.  

Here are some of the previous JSE crashes, and how long it took for the market to recover:  

-11.7% 20 October 1987. Black Monday. 

A month later: -29%

A year later: -21%

This was the biggest crash ever on the JSE – it followed a 23% loss in a single session on Wall Street. The massive slump came after a five-year-long bull market in the US, which saw the Dow Jones Industrial Average triple. The US central bank started hiking interest rates, which cooled the economy and there were fears that the market was overvalued. The introduction of computerised trading added to the volatility. Automatic selling caused stocks to trade down fast.

Other trading days in 1987 also counted as some of the worst ever on the JSE:

  • -8.2% on 17 April
  • -7.5% on 4 November
  • -7.2% on 5 November 
  • -6.5% on 23 October 
  • -6.2% on 26 October 

-11.2%  28 October 1997. Asian financial crisis.

A month later: +6%

A year later: -5%

A financial crisis started in Thailand in July 1997 after it devalued its currency. Previously it was pegged to the US dollar. Investors starting to withdraw their money in emerging markets, which caused a meltdown worldwide.

-10.6% 16 October 1989. ‘Friday the 13th Mini-Crash’.

A month later: +22%

A year later: +10%

This short-lived correction was blamed on computerised selling, which was triggered by a failed buyout deal to take over United Airlines on Friday 13 October 1998. The full impact of the resultant Wall Street crash was felt on the Monday on the JSE. But the markets recovered very quickly.

-9.0% 19 March 1982. SA turbulence.

A month later: -1%

A year later: +52%

The market was rattled by a large fall in the rand - which for the first time ever moved below R1/$ due to inflation and the economic impact of sanctions. 

-7.4% 1 April 1988. Sanctions hit SA.

A month later: +2%

A year later: +63%

Economic sanctions against the apartheid government started to hit hard, with global banks exiting the country and South Africa struggling to pay its international debts. 1988 marked the start of the longest recession in South Africa’s history - but a year later the market was higher. 

-7.4% 17 April 2000. Tech bubble bursts.

A month later: +13%

A year later: +29%

In the five years to March 2000, tech stocks on the Nasdaq index rose by 400% amid massive enthusiasm about the internet and wild speculation. The bubble burst in 2000, and two years later the Nasdaq was 80% lower.

-7.3% 6 October 2008. The global financial crisis.

A month later: +0%

A year later: +19%

The housing boom in the US gave rise to a subprime lending crisis: people who couldn't afford it, were given large mortgages. These dud mortgages were then sold off to banks through intricate financial instruments, which triggered a massive confidence crisis in the financial sector, eventually pushing it to the brink of collapse.

A number of other days also saw huge losses: 15 October (-7%), 24 October (-6%) and 29 September  (-6%).

Here is the full list of the JSE's top crashes, and subsequent moves, provided by market information platform TimBukOne:

Source: TimBukOne

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