The effect of a new wave of COVID-19 on the stock market performance: Evidence from the twenty JSE listed companies in South Africa

Gbenga Wilfred Akinola,Josue Mbonigaba,Keji Sunday Anderu

doi:10.21511/imfi.18(4).2021.07

Gbenga Wilfred Akinola, Josue Mbonigaba + Show 1 more

Open Access

https://doi.org/10.21511/imfi.18(4).2021.07

Copy DOI

Abstract

The lockdown shocks resulting from the global pandemic of COVID-19 in March 2020 brought untold economic imbalance to the financial sector in South Africa. The government’s proactive alternative measure of control to the new wave of COVID-19 must be investigated to offer policy suggestions for future economic and financial planning. Consequently, this study investigated the impact of the new wave of COVID-19 on the financial market with a special interest in the twenty JSE listed companies in South Africa. To enhance the quality in the frequency of study, daily panel data from November 2020 to January 2021 were sourced from S&amp;amp;P Capital IQ and Google online. The impact of COVID-19 was investigated alongside other variables that can influence the return of the stock markets on twenty JSE listed companies. The variables under investigation are daily exchange rate (dollar terms), dividend-adjusted share pricing, daily COVID-19 infection rate. Both robust descriptive and fixed effects time-variant analyses were adopted as the estimating techniques. The study provided empirical evidence that there is a direct but slow link between the daily incidence of infectious COVID-19 and returns on the stock market as key variables. This positive relationship indicates that both COVID-19 and financial activities could co-habit together to enhance greater return on the stock in South Africa. Hence, lockdown may not be most appropriate to the national economy of South Africa.

Highlights

The financial market in South Africa is one of the most developed markets in the continent of Africa
This study investigates whether the South African financial market is immune to the current surge of coronavirus disease
It is worthy to note that few studies like Horowitz (2020), Gormsen and Koijen (2020), and Ngwakwe (2020) have recently tried to come up with different inferences on how the financial market responded to the COVID-19 pandemic but most of these pieces of evidence are from different economies outside South Africa, which show the novelty of this study

Summary

INTRODUCTION

This study investigates whether the South African financial market is immune to the current surge of coronavirus disease. This emerging concern baffles regulators and investors and there is the need for quick answers to inform them of the nature of the market reactions through available data. It is worthy to note that few studies like Horowitz (2020), Gormsen and Koijen (2020), and Ngwakwe (2020) have recently tried to come up with different inferences on how the financial market responded to the COVID-19 pandemic but most of these pieces of evidence are from different economies outside South Africa, which show the novelty of this study. The findings from this study could serve as a future guide for both investors and multinational agencies such as World Health Organization, World Bank, World Trade Organization, International Monetary Fund, and the South African government research institutes

LITERATURE REVIEW

METHODOLOGY

DISCUSSION

Findings

CONCLUSION