The Johannesburg Stock Exchange (JSE) has been causing more than a few sleepless nights over the last while as stocks continue to perform poorly.

The key banks index and the general retail index have been hit particularly hard over the past couple of weeks.

Things look bleak for the foreseeable future, but they move and change pretty quickly on the JSE, so we can’t tell you what it’s going to look like a month from now.

What we can tell you is that as of Wednesday’s close, Johannesburg’s benchmark index recorded the biggest August decline since 1998, and the steepest retreat for any month since October last year, reports Bloomberg.

Everyone agrees that the cause of the decline can be attributed to trade hostilities between China and the US:

Conflict over tariffs between the world’s two largest economies has spurred investors to flee riskier assets, including net sales of 23.4 billion rand ($1.5 billion) of South African stocks since Aug. 1.

“When two elephants fight, it is the grass that suffers,” said Peter Takaendesa, a money manager at Mergence Investments in Cape Town, which oversees about 35 billion rand. “The impact of their war is being felt in the emerging markets.”

There’s some good news, though, depending on how you look at it.

The picture could have been worse: the benchmark index has been propped up by gains in rand-hedge stocks benefiting from the currency’s 6.5% retreat against the dollar this month because of revenue earned abroad, and by the best month for gold shares since February 2016 as jittery investors take refuge in the traditional haven of bullion.

“The rand hedges have helped, because domestic counters are down even more than that, particularly retailers and banks,” Takaendesa said by phone. “Domestic South African stocks have been much weaker than is shown by the index.”

General retailers have tumbled more than 8% this month as companies including Mr Price Group Ltd. bemoaned the state of the South African economy and weakness among consumers. Bank stocks have lost 6%, pummeled by the slide in the currency.

Some experts will tell you that investing in certain shares now, especially general retailers like Mr Price Group Ltd., could yield some big rewards in the future.

That said, when in doubt, some would say it’s best to err on the side of caution.

[source:bloomberg]