Investors lost their nerve yesterday after news that the "credit cancer" had spread to Europe - and leaders there had failed to take decisive action to cure it.
World stock markets plummeted on that news, reaching four-year lows yesterday.
The JSE followed suit as investors fled emerging markets, closing 7,3percent down - effectively wiping between R200billion and R250billion off the local bourse.
"In a market environment like this anyone who would normally be buying stock is sitting on their hands, while sellers are selling in a panicky way," said Paul Theron, chief executive of Vestact.
By late yesterday afternoon the rand was trading at R8,90 to the US dollar, five percent weaker than when the local market closed on Friday.
"A lot of people anticipated things turning around on the US bailout package, but events over the weekend seemed to be focussed on European banks," Theron said.
European leaders met over the weekend to discuss their troubled financial institutions but failed to come up with a joint plan to curb the spread of the credit crisis, a disappointment which traders said hurt investor confidence. "The market is reacting to the extent to which the world could slow down and the extent to which the US could affect the rest of the world," said Hlelo Giyose, value fund manager at Stanlib Asset Management.
"The leaders of European countries lost a golden opportunity when they met last week to discuss a joint bailout plan. They needed to do more, and they've done less."
"The market is really spooked by what could happen in Europe, so unless the Europeans hurry up and get it together, we'll have a repeat of what happened in the US," he warned.
"It's panic, it's capitulation," said David Shapiro, consultant at Sasfin Securities, explaining the sell-off in local stocks. "The rand dropped five percent - it's the idea of withdrawal from emerging markets."