MTN Group shares fell more than 15% on Monday, to their lowest levels in nearly 14 years, as investors digested the news of a shock fall in oil prices overnight.

Also possibly weighing on sentiment was news that the group is at risk of having its debt downgraded by rating agency S&P Global Ratings, also because of its exposure to Nigeria.

The shares fell to as low as R64.75 over concerns about the impact of collapsing oil prices on the Nigerian economy. They closed down 15.1% at R64.95 apiece. Nigeria is MTN’s biggest and most profitable subsidiary. The West African country’s economy is heavily dependent on oil.

Brent crude was trading at US$37/barrel at 5pm South African time, down about 20%, after Saudi Arabia announced it would ramp up production and slash prices after Russia pulled out of an Opec plan to curtail output. This has led to fears of an all-out price war, sending stock markets around the world — including the JSE — into a tailspin. The rand also fell sharply.

Energy and chemicals company Sasol bore the brunt of the sell-off on Monday, with its shares falling by 50% in Johannesburg.

Contagion

However, the contagion also spread to telecommunications and ICT shares on the local bourse, with MTN the biggest loser. MTN is due to report annual results for the year ended 31 December on Wednesday.

Business Day reported on Monday afternoon that S&P’s negative outlook for Nigeria reflected “the significant possibility of a downgrade over the next 12 months” for MTN based on Nigerian market risk.

The newspaper said the rating agency affirmed MTN’s BB+ long-term issuer credit ratings but warned it could downgrade the group overall given the risk profile of Nigeria as a country. — (c) 2020 NewsCentral Media