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Rand climbs 1%, stocks retreat from record highs

Naspers down 4.96% while Prosus falls 5.21%.
Image: Mike Hutchings

South Africa’s rand firmed by more than 1% on Tuesday in a return of risk appetite globally as investors continued to weigh the benefits of fiscal stimulus and coronavirus vaccine rollouts over concerns about second and third wave infections.

At 17:00 the rand was 1.15% firmer at R15.04 per dollar, from an opening level of R15.24.

The South African currency, along with fellow emerging market currencies, was boosted by a weaker dollar, which was down 0.2% in the session.

Optimism over a fiscal stimulus plan by the United States has spurred risk-taking in recent weeks, although that enthusiasm has been subdued in recent sessions by rising Covid-19 infections in major economies.

South Africa’s still high yield, after the central bank narrowly decided against lowering lending rates last week, has partly shielded the rand from the country’s slow progress in securing vaccines.

South Africa, which has recorded more than 1.4 million Covid-19 cases and 41 000 deaths, the continent’s most infections by far, has yet to receive its first coronavirus vaccine doses.

Bonds edged weaker, with the yield on the benchmark 2030 paper up 2 basis points to 8.78%.

Equities

In the equities market, however, stocks retreated from record highs as investors focused more on potential obstacles to US President Joe Biden’s planned $1.9 trillion (R28.6 trillion) stimulus weighed on sentiment.

The Johannesburg All-Share index fell 0.99% to 63 923 points after hitting an all time high of 65 346 points in the previous session, while the Top 40 index declined 1.16% to 58 720 points from a record high of 60 264 points.

“Markets were expecting that the Democrats will act promptly to get the huge stimulus bill passed by Congress,” Milan Cutkovic, market analyst at AxiCorp, said in a note.

“However, the negotiations could last several weeks and market participants have started to realise that the package faces significant obstacles.”

Among the decliners, market heavyweights media and internet company Naspers declined 4.96% while its international arm Prosus retreated from a record high, falling 5.21%. Prosus holds a third of Chinese tech giant Tencent, which fell 6.26%.

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