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Rand gains as risk demand resurfaces, stocks firmer

Rand, bonds firmer as Brexit impact wanes.

JOHANNESBURG – South Africa’s rand strengthened on Tuesday after two days of losses as emerging assets returned to favour following steep declines triggered by Britain’s vote last week to quit the European Union.

Brexit-bashed stocks were also firmer as shares in companies linked to the United Kingdom found some relief.

By 1545 GMT, the rand had gained 1.67 percent to 15.1600 per dollar, riding the wave of a broad developing market recovery spurred by a weaker dollar and a pledge from China to counter further Brexit-related volatility.

The rand initially raced towards the crucial 15.00 psychological mark, but lost steam as traders booked profits.

Sentiment towards commodity-linked currencies like the rand was also helped by rising oil and copper prices.

“USD/ZAR should already be back at 15.10 and heading lower. Milk it for what it is worth; this rally may not have legs if the UK pressures continue,” said currency strategist at Rand Merchant Bank John Cairns.

Local bonds also rallied, with the yield benchmark on the government paper due in 2026 dropping 24.5 basis points to 8.9 percent.

On the bourse, the benchmark Top-40 index rose 2.18 percent to 45,107 points while the All-Share index increased 2.11 percent to 51,141 points. The biggest gainers were shares with interests in the UK.

Blue-chip financial services firm Investec climbed 6.8 percent to 90.33 rand, while food services firm Bidcorp , which makes nearly half its sales in Britain, rose 6.44 percent to 256 rand.

Insurer Old Mutual, whose primary listing in London, gained 3.4 percent to 37.65 rand. The firm said on Tuesday its preferred option after splitting into four would be to have two of the new companies listed on both the London and Johannesburg stock exchanges.

“Markets are just trying to come back … anything attached to the UK market is experiencing quite a bounce today because they got hit particularly hard since the Brexit vote,” said Vunani Private Clients trader Roberto Pietropaolo.

Trading was active, with a total of 302 million shares changing hands compared with last year’s daily average of 280 million.

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