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Rand climbs to 2-week best, stocks led higher by Lonmin

Suspended mining laws, weak US CPI lifts rand.

JOHANNESBURG – The rand reached its firmest level in two weeks as the suspension of new mining laws and weak data from the United States pushed the currency past crucial technical levels and lured back investors hungry for high yields.

Stocks ticked up, led by buying coming back into Lonmin after it cut costs and boosted third quarter mining performance.

By 1500 GMT the rand had gained 0.86% to 12.9175, a touch softer than the session-best 12.8900, blowing past 13.00 technical resistance barrier last reached on June 29.

“The disappointing US inflation numbers and the mothballing of the mining charter, that momentum is still coming through today,” said currency dealer at Treasury One Andre Botha.

On Friday, South Africa said it suspended the implementation of new mining laws, which include raising the level of shares black people should own in mining firms, pending a court ruling on a challenge lodged by the Chamber of Mines.

The announcement of the laws in mid-June saw the rand slide 2% and mining shares plunge, and prompted a warning from ratings agency Moody’s that the new rules would deter investment, raise costs and diminish cashflow generation.

The rand has now advanced nearly 5% from a two-week low in the previous week, aided by calm in the local political situation and dimming speculation of more than one rate rise in the United States.

The lure of the rand as a carry trade has also been boosted by expectations that the central bank will again keep benchmark rates unchanged at the end of its policy meeting on Thursday.

On the bourse, the benchmark Top-40 index ticked up 0.4% to 47 499 points while the All-Share Index rose 0.43% to 53 827 points.

Shares in Johannesburg stock exchange-listed Lonmin rose to its highest level in more than a month after buying came into the previously over sold platinum miner when it cut more costs and improved its mining performance in its third quarter.

“We know they haven’t had a great year, they’ve been in a lot of trouble. That’s more to do with investors being very short on the stock and I would suspect that there’s a bit of a squeeze on short covering,” Independent Securities trader Ryan Woods said.

Lonmin closed up 14.82% to R12.86.

In fixed income, the yield for the benchmark government bond due in 2026 fell 5 basis points to 8.645%. 

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David Kop

David Kop

The Financial Planning Institute of Southern Africa (FPI)
Moneyweb Click an Advisor
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