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

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&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. © Gbenga Wilfred Akinola, Keji Sunday Anderu, Josue Mbonigaba, 2021


INTRODUCTION
The financial market in South Africa is one of the most developed markets in the continent of Africa. Along with this development, there is the financial crisis bedeviling the economy over the years. South African economy has been faced with numerous downturns in the past two decades, which include the Asian crisis of 1998, the bubble collapse and currency crunch of 2001, the world financial crisis (GFC) in 2008, the renegade and European Monetary Crisis of 2016, and nowadays the COVID-19 pandemic. The contraction of the South African economy from 5% to as little as - 23.5% has been predicted by experts for 2020 with certain industries to be more severely affected than others (PWC, 2021). The incidences of novel coronavirus cut across the different sectors of the economy and this has drastic effects on the 2020 South African economic outlook as predicted by the experts (OECD, 2020). The background problem of this study is that in the past, the financial market responded to unforeseen incidences such as a pandemic outbreak or financial crisis. Findings have shown that in both cases of the pandemic outbreak and financial crisis, finan-cial markets had not been immune against financial shocks. Consequently, the financial market in most cases reacted differently to unexpected occurrences. 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 motive behind the choice of South Africa is because its economy is one of the countries with high incidences of COVID-19, which would to some extent reveal the relevant pieces of evidence on how the new wave of the pandemic has influenced the South African financial market performances within the period under review. The sampled twenty JSE listed companies are market leaders in South Africa, hence a justification for their selection. Interestingly, 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 AND HYPOTHESIS
There are various theoretical contributions to the effects of coronavirus outbreaks on stock market performances. Theriou et al. (2006) argued that CAPM analyses the disparity between expected asset returns and systemic risks as affected by investors in line with current circumstances in the global financial market. The COVID-19 pandemic has strongly been linked with economic recession global. Theoretically, the impact of the COVID-19 pandemic could be viewed from the perspective of demand and supply shock: (1) aggregate supply was perturbed by the global supply chains disruption, the decline in the supply of labor force was orchestrated by social distancing and quarantine, (2) aggregate demand caused by the lockdown was also disrupted from multiple dimensions. The decline in the consumption of durable goods (household appliances, cars, consumer electronics), services (tourism, restaurants), and the uncertainty surrounding the spread of the disease-causing households, firms, and organizations increased their precautionary savings in order to curtail consumption. This uncertainty condition also causes some informal workers or non-permanent, to lose income thereby leading to the reduction in consumption, and this uncertainty adversely affected firms' liquidity and consequently stopping investment (Lanchimba et al., 2020).
Therefore, CAPM together with demand and supply shock theories serve as the bedrock to this study and they shall be put into context to fill the spotted gap identified in this study.
South African financial markets efficiently facilitate the direct movement of investment and assets in an economy. It enhances the accumulation of capital and the production of goods and services through the activity of the stock exchange market. The market makes a direct contribution to the South African economy through its value-added contribution to Gross Domestic Product, taxation payment, and employment creation. However, risk effects resulting from the influence of the COVID-19 disease on the financial market require the right application and the understanding of the capital asset pricing model to better explain the theoretical foundation of the concept under investigation.
CAPM defines the association between systematic risk and anticipated return for assets, especially stocks. This is widely adopted in the field of finance for pricing uncertain stocks and creating anticipated earnings for assets due to the risk of these assets and capital cost (Theriou et al., 2006). Many factors may constitute risk factors to the financial market. Notably, within the recent global financial experiences, the COVID-19 pandemic has been identified. The implication is that the COVID-19 outbreak has constituted a risk factor capable of slowing down the rate of return in investment, which is not a foreseeable adventure by the investors. The market is assumed to be competitive that would spur a rise in capital market aggregate line while the risk is achieved. The capital asset pricing model is developed via the Lagrangian multipliers method. In this case, flat risk gains are being forgone along the risk calculated by parameter estimates, probably non-changeable risk. Whereas the priced risk at the market interjection point is the risk that cannot be spread away. CAPM is propounded concerning the comparatively controlled theoretical framework. Therefore, it paved way for the linear systemic link between returns and risk in the capital market. This theoretical model better explains the explanatory variables that intuitively fit into the measurement of the effect of the novel coronavirus wave on the security market returns of twenty listed companies in South Africa. The results showed both hypothetical and applied inferences through the effective market assumption. Implying that the more accurate information is available to the investors, the better the market proficiently reacts to external shocks. The future gap was disclosed in the study by the researchers on the need to examine the long-term influence of an outbreak on the stock market performance.
Gormsen and Koijen (2020) predict a decline in economic output and dividends throughout the year 2020 because of the COVID-19 outbreak. The study adopted a forecasting model from aggregate stock market data based on the future dividend to measure investors' expectations. The study aimed at showing how the real forecast and bound change over time, across three major stocks markets: EU, Japan, and the US. Consequently, the trends of dividends dropped by 8% in Japan and the US, while a 14% decline is expected from the EU (as a result of COVID-19). Meanwhile, the expected growth in terms of output tends to fall by 2% both in the US and Japanese markets, while a 3% decline in the EU market is expected. Hence, it is suggested that forward-looking and frequent-update measures are the keys for government and investors towards a sustainable economic growth path in the time of financial distress induced by the pandemic. Yan et al. (2020) submitted that the possible negative results of COVID-19 on the stock market could only be for the short-term while in the long run, the invisible hands of the market would normalize this potential adverse effect. The study models three US industrial sectors to justify their claims in the entertainment industry, technology industry, and travel industry. It was further stressed that a potential drop in profit due to a fall in price in those industries because of an outbreak could be eventually bought back in the long run. Those studies revealed that coronavirus had a negative impact on the socio-economic growth of the selected economies.
Given the above findings, although, the divergence views from the previous scholars informed this study so far, it is obvious that there have been scanty or few works on the effects of the coronavirus outbreak on the stock market and productivity level in South Africa, which is one of the worst-hit economies in the world. Again, the extent of the COVID-19 effects on financial activities among most countries had been of less focus in the literature particularly among emerging markets like South Africa. Consequently, this study aimed to investigate the effects of the new wave of COVID-19 on the financial market in South Africa with special consideration to twenty JSE listed companies.
The research hypothesis for this study is stated as follows: H1: The new wave of COVID-19 has a positive effect on the financial market in South Africa.

METHODOLOGY
This study follows the fixed effect model developed by Paola where Return ∆ is the changes in returns on stock for the 20 JSE listed firms, as the time lag in the model, this is required in the model since the past must explain the present. COVID-19 represents the daily infections rate over three consecutive months, DASPricing is the dividend-adjusted share pricing, ExchR proxy exchange rate and of course ∂ is the error term representing the uncaptured variable capable of exhibiting some missing variable biases and i represents the number of cross-sections.
Data on daily infections of COVID-19 was sourced from Google online, returns on the stock market and dividend-adjusted share pricing were sourced from S&P Capital IQ. The frequency of data is daily to allow for volatility variations for three months.

RESULT
This study used trend, descriptive and fixed-effect analysis, among others to examine the effect of coronavirus on South African stock market performance for ninety days, using data from stock market returns, adjusted share pricing, COVID-19, and exchange rate across twenty listed companies. This is to further unravel the extent to which each company's stock market returns reacted to COVID-         D4  D7  D10  D13  D16  D19  D22  D25  D28  D31  D34  D37  D40  D43  D46  D49  D52  D55  D58  D61  D64  D67  D70  D73  D76  D79  D82  D85 Table 1 addresses the theoretical issues about the concept under investigation.
To ensure that the multicollinearity problem does not emerge, panel correlation analysis was conducted and the result in Table 1 indicates the absence of multicollinearity. All variables exhibited weak association except the association between COVID-19 and exchange rates. The negative association between dividend-adjusted share pricing and stock market returns should be subjected to further investigation.
Mean averages among others are one of the measures of central tendencies and for the normality test, Table 3 showcases the result on skewness and kurtosis with strong probability values. The nearness to zero indicates a well-fitted model. The skewness and kurtosis indicated that the study's model was normally distributed and skewed. Table 3 shows the result from fixed effects analysis. It is clear from the table that the new wave of COVID-19 has a positive effect on the stock market in South Africa. This is evidenced with the significant P-value and positive coefficient indicating a positive link between COVID-19 daily infections and returns on the stock market.

DISCUSSION
The result in Table 3 showcases the fixed effects analysis of COVID-19 infections on the stock market returns of the 20 JSE listed companies in South Africa over 90 days. The November 2020-January 2021 period represents a period of the new wave of COVID-19 infections. The result from Table 3 shows a positive link between COVID-19 daily infections and returns on the stock market within the range of three months period under investigation. Activities such as sales of stock at the stock market during the new wave of COVID-19 were not put-on hold in South Africa, which could account for the positive relationship. However, the coefficient value of 0.00000302 in effect is an indication of a very weak relationship, indicating a slow velocity of movement during this era. Any unit increase in the possible outbreak of COVID-19 when financial activities were allowed to co-exist together would cause returns on stock to increase by 0.00000302. Besides, both dividends adjusted share pricing and the exchange rate had a significant rise during the period under investigation. This result negates the findings of Takyi and Bentum-Ennin (2021) and Nwosa (2021) whose results unanimously agree on the inverse relationship of the COVID-19 outbreak with financial market activities. This period performed better than the period of lockdown. For instance, the market during lockdown performed poorly in the South African market, both the Johannesburg  stock exchange (JSE) all share index started to fall by the end of February and two weeks later, the S&P 500 began to decline. In particular, the report indicated that the all-share index (ALSI) top 40 had a steady decline on February 13, 2020 immediately after South Africa's State of the Nation Address. Total losses reported were close to 35% since January 2, 2020. The volume of trade initially spiked by the end of February 2020 as markets dived into a state of panic. Exchange rate volatility was also not in favor of the South African market during the lockdown. South African market currencies weakened drastically against the US Dollar as investors considered these currencies as risky in an already volatile market. Rand in South African declined to a more than four-year low during the period but eventually appreciated when restrictions were eased as COVID-19 gradually declined. Other commodities market was also affected by COVID-19 as deterioration in the spot price was observed for metals such as platinum and aluminum. In March 2020, the spot price on platinum lost 45 percent of the total value, the lowest in 17 years.
The paper further addresses the distributive link between the COVID-19 daily infection rate and associated returns on stock, exchange rates, and dividend-adjusted share pricing respectively. These constitute the variables under observation. The trend of the relationship result is graphically illustrated in Figures 21-24, which show the symmetry plotted graphs showing the relationship among COVID-19 contractions, the returns on the stock market, exchange rates, and dividend-adjusted share pricing among the 20 JSE listed companies.   Dividend Adjusted Share Pricing el were distributed the same way. It simply implied that the tails of the distribution are mirror images of reality. The symmetry plot graphs the upper distance of the median on the x-axis vis-a-vis the lower distance to the median on the y-axis, for each data point. The graph truly reflected the increasing trend in the COVID-19 pandemic alongside this upward movement in the dynamics of association with financial activities.

CONCLUSION
This paper aimed to examine the effects of the new wave of COVID-19 on the financial market with data from the twenty JSE listed companies in South Africa. Robust descriptive analysis with plotted median distributive graph and fixed effects time-variant analysis was adopted as the estimating techniques. The result from trend analysis was based on the stock's return performances across the twenty South African listed companies. From the result, Chem Pharmacies Limited, Nam Divi Share, AngloGold Ashanty Limited, MTN Group Limited, Sasol Limited, Adapt IT Holdings Limited, and Acson Limited were the worst-hit companies with less than 1 percent of stock market returns into two months of the pandemic outbreak. While Exxaro Resources Limited, Enx Group Limited, Investec Bank Limited and Nampak Limited, Santam Limited, Sappi Limited, and Nedbank Group Limited stock returns dropped sharply at the first twenty days of the pandemic and later showed resilient towards the last fifteen days under review. Interestingly, Momentum Metropolitan Holding Limited, Impala Platinum Limited, Mr. Price Limited, Absa Group Limited, Bid Corporation Limited and Investec Bank Limited were better off in their stock returns, with more improved performances towards the end of the first month despite their first ten days shocks.
Again, the result of the fixed effects showed a positive but sluggish link between the daily incidences of infectious COVID-19 and returns on the stock market adjusted share pricing. Any unit increase in the possible outbreak of COVID-19 when financial activities were allowed to co-exist together caused returns on stock to increase by 0.00000302. Further, returns on stock also increase by 0.0004336 as a result of a unit increase in stock market adjusted share pricing. This positive relationship indicates that both COVID-19 pandemic and financial activities were made to co-move together in South African thereby restricting the COVID-19 pandemic from impacting negatively on financial activities at the period of investigation. It is axiomatic from the result of trend and fixed effects analysis that firms respond to market shocks differently during the COVID-19 pandemic. Consequently, government policies on lockdown may be viewed from various perspectives of market behavior as total lockdown of the economy during COVID-19 may not be the most appropriate approach to financial intervention in the interest of the national economy in South Africa.