The JSE all share in May suffered its worst month since October 2018, as fears of deteriorating local and global economic conditions took its toll on risk assets.

Pressure on equities and emerging-market currencies, including the rand, is expected to continue for some time, analysts say, and post-election euphoria may reduce further should economic data this week confirm fears over the fragility of the local economy.

The JSE fell 4.92% in May, although global equity markets registered similar declines, with the Dow falling 6.69% and the MSCI world index — which tracks equities in 23 countries — falling 6.08%. There were also some eye-catching falls due to local corporate news, notably Massmart, which plummeted 28.52%, and Sasol 22.74%.

Share-price activity on the JSE in May underscored SA’s position, said Capicraft Investment Partners analyst Drikus Combrinck, with poor economic conditions beginning to reflect in the price of equities, notably companies dependent on the local economy.

Companies had been suffering from escalating wage costs and uncertainty as well as stagnant growth, Combrinck said, and the optimism around the elections that supported the rand was beginning to fade as markets come to terms with the fact that policy reforms may come slower than previously hoped.

“For all intents and purposes, SA is stagnating; it just took a while to reflect in the share prices,” Combrinck said. “Markets won’t be pricing in a recovery any time soon,” he said.

The rand fell 2% to the dollar in May, although it found support in the first two weeks of the month, due to optimism the election may deliver a result that would provide President Cyril Ramaphosa with the political capital he needs to root out corruption and implement policy reforms that would stimulate growth.

The rand was likely to be under continued pressure as the US-China trade war escalates, said Peregrine Treasury Solutions corporate treasury manager Bianca Botes in a note. “GDP figures due for release this week are likely to cause some short-term volatility, however, the greater performance of the rand will continue to be determined by global factors, with poor economic data merely fuelling the already fairly large fire,” she said.

Local focus is on SA’s GDP print for the first quarter of 2019, with a Bloomberg consensus showing that the economy may have contracted 1.6% year on year.

The rand is at risk of further depreciation and volatility, and could see a trading range of R14.40/$ to R15.40/$ in the week ahead, said Investec chief economist Annabel Bishop in a note. The US-China trade war remains the dominant issue, and the rand could weaken even further should China indicate it is not interested in negotiations, she said.

It may be unlikely that the rand and other emerging-market currencies will find any significant support pending positive developments in the US-China battle.

Investors might have to wait until US President Donald Trump and Chinese President Xi Jinping meet at the G-20 summit at the end of June, said Oanda analyst Craig Erlam.

“I don’t see risk appetite improving dramatically for emerging-market currencies, particularly those which are more [highly liquid], including the rand,” said Erlam.