Thursday, 08 September 2011 - 20:00
S.African stocks end higher, bonds reverse losses
By David Dolan and Stella Mapenzauswa
JOHANNESBURG (Reuters) - South Africa stocks finished up 1.5 percent on Thursday, capping a volatile day of trade as insurer Sanlam rose on strong earnings and overseas expansion, while Impala Platinum was hammered on fears it would lose its Zimbabwe licence.
Government recouped some of Wednesday's losses and yields inversely headed back towards recent record lows after weak factory output data backed the case for interest rate cuts as the domestic economy struggles in line with a global slowdown.
The rand weakened slightly against the dollar, partly weighed down by the manufacturing data, but edged higher against a struggling euro after comments from the European Central Bank pointed to rates in the euro zone not rising in the short term.
Skittish investors briefly sent the Top-40 index of blue chips into negative territory after data showed continuing weakness in the U.S. labour market, raising further concern about the world's largest economy.
But that sell-off was short-lived, and Johannesburg stocks recovered in late trade, with banks and gold miners among the gainers.
"It's been a complete four seasons in one day," said Mitchell Gannaway, a trader at Thebe Securities.
The Top-40 index rose 1.5 percent to close at 27,607.75, its second straight advance and its highest finish in five sessions.
The broader All-Share index rose 1.3 percent to 30,918.00.
The yield on the 2015 government bond was down 14.5 basis points on the day at 6.33 percent, reversing Wednesday's gains in a move partly driven by data manufacturing output fell by 6.0 percent year-on-year in July, increasing the chance of an interest rate cut.
The yield on the 2026 issue fell 14 basis points to 7.765 percent.
On the bourse, Sanlam Ltd rose 3.2 percent to 27.82 rand after South Africa's second-largest insurer reported a 30 percent rise in first-half earnings and said it would pay $265 million to expand its presence in India.
"They have proven to be quite astute when they deploy capital," said Safs Narker, an equity analyst and portfolio manager at Momentum Asset Managers.
"There is risk in any market but management have proven that they are quite conservative when they make their investments."
Shares of Impala Platinum, the world's second-largest producer of the precious metal, tumbled after Zimbabwe's official state newspaper said the government has begun a process to suspend the licence of its Zimplats unit.
Implats, as the company is known, fell 3.4 percent to 170 rand. Zimbabwe is home to the world's second-largest platinum reserves.
"People are realising that things just aren't going to work out (for Implats) in Zimbabwe," said Thebe's Gannaway.
"I'm sure some people thought the government wasn't going to do anything."
Gold miners rose, helped by a 2 percent jump in the price of the precious metal. AngoGold Ashanti, Africa's largest gold producer, gained 3.5 percent to 337 rand.
The market was quite aggressively pricing in lower domestic rates, with forward rate agreements factoring in a 50 basis point reduction by April next year, bond traders said.
The July year-on-year drop in manufacturing, the first since November 2009, added weight to that view.
"The bonds found support today as the growth outlook for South Africa deteriorated. At this point in time, South African data is painting a similar picture to what we're seeing offshore," said Brigid Taylor, Head of Institutional Sales at Nedbank.
The yield spread between South Africa's two most liquid government bonds was around 145 basis points, indicating support for longer dated paper, Taylor added.
The rand was caught within a 7.05-7.25 range most of the day, with inflows into the debt market from foreigners off-setting a general aversion to riskier assets.
The currency traded at 7.1578 to the greenback by 1630 GMT, down 0.47 percent from Wednesday's close. It however rose 0.7 percent to 9.9644 versus the euro.Thu, 08 Sep 2011
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