Worst August Since 1998 For South African Stocks Thanks To U.S.-China Trade Hostilities

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Written by Peter Pedroncelli
South African stocks Johannesburg Stock Exchange
South African stocks have taken a beating in August thanks to the negative effects of the trade war between the U.S. and China. Image – AP – Denis Farrell

The trade war between the U.S. and China is impacting emerging markets, with South African stocks particularly hard-hit in August.

This is set to be the worst August for Johannesburg’s benchmark index in 21 years following a decline of around 4.4 percent since the beginning of the month, Bloomberg reported at Wednesday’s close, Aug. 28.

The worst August performance since 1998 is as a result of continued trade hostilities between China and the U.S., the two biggest global economies, according to Bloomberg.

The White House policy of increasing tariffs on Chinese goods under President Donald Trump has been met with Beijing upping duties on American products.

President Trump accuses China of unfair trading practices and intellectual property theft. China believes the U.S. is trying to slow its rise as a global economic superpower.

Since March 2018, the U.S. has imposed tariffs on $250 billion of Chinese products, and China has retaliated with tariffs amounting to around $110 billion of U.S. goods, according to the BBC.

In times of economic uncertainty, investors often consider emerging markets to be riskier investments. This has led to a $1.6 billion sell-off of South African stocks since Aug. 1, Bloomberg reports.

Around 10 percent of South Africa’s total exports go to China, and as the Chinese economy is hit by the trade tensions, South Africa’s trade with China could be adversely affected.

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The month is expected to be recorded as the biggest August decline since 1998 on the Johannesburg benchmark index and the steepest retreat for any month since October 2018, Bloomberg reports.

The key banks’ index and the general retail index on the Johannesburg Stock Exchange have been hit particularly hard over the past few weeks.

It could have been worse if not for gains in rand-hedge stocks benefiting from the currency’s 6.4 percent retreat against the dollar.

This was due to the best month for gold shares since February 2016 as investors head for safe-haven investments.