The Namibian Stock Exchange (NSX) overall share price index fell to 900.32 by the end of the first quarter of 2020 and closed at 1306.36 points at the end of 2019, when compared with 1307.76 points at the end of 2018.
The Local Index closed at 613.87 points at the end of 2019, 1.5% lower than at the end of 2018. This was stated in the Namibia Financial Supervisory Authority (Namfisa) 2019/2020 financial report.
“The performance of the NSX overall share price index slowed marginally in 2019 when compared with 2018. However, this slow pace was followed by a significant decline in the first quarter of 2020,” reads the report.
It further revealed that equity markets recorded the worst fall in history, with the S&P 500 falling by 20% from its peak in only 16 trading sessions.
The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.
According to analysts, the lower value in equity markets may pose a threat to institutional investors with substantial exposure to equity and to pension plans that are nearing maturity.
Meanwhile, the same report noted that the Namibian financial system remained sound and stable during 2019 before risks increased in 2020 due to the spread of Covid-19.
Overall, Namfisa stated that the financial system was sound and profitable in 2019 and continued to function efficiently and effectively. However, since the outbreak of Covid-19 in January 2020, sentiment became gloomy.
The long-term impact of Covid-19 on the financial sector remains uncertain and largely depends on the containment of the pandemic. Despite the geopolitical and trade tensions that arose during the reporting period, global equity markets performed well during 2019 up to the outbreak of the Covid-19 pandemic.
According to Namfisa, most major global indices had improved during 2019, despite risks emanating from trade wars and increased geopolitical tensions as well as social unrest during 2019.
However, global equity markets plummeted as the panic around the Covid-19 outbreak dampened investor confidence in the markets.
According to the IMF’s Global Financial Stability Report for April 2020, global financial conditions tightened sharply since the onset of pandemic.
“Financial conditions were broadly accommodative during 2019, characterised by reduced financial market volatility and stable interest rates in both advanced economies as well as in emerging markets and developing economies. With the outbreak of Covid-19, there was a significant increase in uncertainty,” stated the IMF report.
The report added that the increase was amply portrayed by stock prices that dropped notably as investors sought to rebalance their portfolios to reduce risk as well as invest in safe and liquid assets such as cash and treasury securities.
Going forward, fiscal and monetary authorities worldwide are expected to continue with stimulus packages, accommodative monetary policy stances and easing of macro prudential regulation to support their economies during this uncertain time.
mndjavera@nepc.com.na