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Rand hits new 11-month low, stocks firm

Moody’s downgrade fears weigh on sentiment.

The rand steadied in late trade on Thursday, after slipping to a new 11-month low in the session as concerns about the outlook for domestic growth and fears over a sovereign credit rating downgrade weighed on sentiment.

At 1515 GMT, the rand traded flat at 15.05 per dollar, after hitting 15.20 earlier, its weakest level since September 2018.

Poor economic data, worries about financial troubles at state-owned power firm Eskom and negative commentary from credit rating agencies have all contributed to recent rand weakness, exacerbating broader concerns about emerging markets and trade tensions between the United States and China.

President Cyril Ramaphosa, who has staked his reputation on reviving Africa’s most developed economy, has struggled to do so. Data showed on Thursday that mining and manufacturing output contracted on a year-on-year basis in June.

The uncertain growth outlook has triggered fears of a rating downgrade by Moody’s, the last of the three big international ratings agencies to have South African debt at investment grade.

“I would say the November review by Moody’s is more likely than not to result in a downgrade,” said Nomura emerging markets economist Inan Demir, pointing to both the worsening trajectory of debt to GDP and the likely need to pump money into struggling state-owned firms such as Eskom.

“It would be my baseline now,” said Demir.

On the bourse, stocks ended a terrible week, marked by risk aversion on trade tensions, on a high note as the All-share index gained 0.56% to 55 535 points, while the Top-40 index rose 0.74% to 49 619 points.

After reeling from worries in the past week about an escalating US-China trade war denting global growth, emerging markets and other risk assets breathed a sigh of relief as surprisingly upbeat trade data from China and hints that Beijing officials will limit losses in the yuan eased growth worries for now.

Local stocks had slipped over 2% to two-month lows.

“With all the talk of the trade wars and uncertainty regarding the Fed rates, investors are looking for a direction to park their funds,” said Maghmoed Allie, a portfolio manager at Sanlam Private Wealth.

Among the gainers BHP climbed 2.91% to R331.83, while Anglo American rose 2.9% to R339.05.

South African e-commerce giant Naspers rose 2.37% to R3 449.99.

The Gold index ended a week’s rally as equities markets recovered, falling 4.14%.

In fixed income, the yield on the benchmark government bond due in 2026 rose by 2 basis points to 8.395%. 

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