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GDP recovery boosts rand, bonds and retail stocks

Currency gained most since June 3.

The rand rose as much as 2.5% against the dollar to its strongest in more than a week on Tuesday, buoyed by data that showed South Africa’s economy bounced back between April and June after a rocky first quarter.

The local currency climbed to a session high of 14.0070 to the dollar, its firmest since Aug. 26, and was trading 2.76% higher at 13.9967 by 23:40.

The bulk of its gains came after Statistics South Africa said the economy grew by 3.3% in the second quarter.

Government debt followed suit, with the yield for paper maturing in 10 years shedding 12.5 basis points to close at 8.725%.

Stocks ended mixed, with the benchmark Top-40 index down 0.15% at 47,008 points while the All-Share index inched up 0.11% to 53,680 points.

The stronger GDP data, coupled with recent data showing a trade surplus, has provided a reprieve for the rand, buffeted by worries that Finance Minister Pravin Gordhan could be charged over the activities of a unit set up when he was head of the tax department.

“The improvements observed in the terms of trade picture in recent months is probably the most encouraging aspect of today’s GDP release and should bode in favour of narrowing the still elevated external account imbalances,” BNP Paribas Securities South Africa analyst Jeffrey Schultz said.

“This has the potential to provide some near-term respite for the rand which has recently been negatively impacted by unfortunate political uncertainty.”

On the bourse, shares in construction giant Wilson Bayly Holmes-Ovcon were the star performer, rising 3.55% to R159.46 after it reported a 23.8% rise in full-year profit.

Retailer Foschini Group was up 3.56% to R141.39 after it said sales grew 17.2% for the five months to end August.

The second quarter recovery in the economy helped retail stocks like Mr Price, which was up 2.14% to R166.50 and Clicks, which added 3% to R124.

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