Wednesday, 14 September 2011 - 20:00
S.Africa's rand and bonds fall further, stocks up
By Phumza Macanda and David Dolan
JOHANNESBURG (Reuters) - South Africa's rand weakened sharply against the dollar on Wednesday and looked set to test 2011 lows at 7.50 in the next few sessions, while bonds mirrored the currency's bearishness.
Johannesburg stocks rose for the second straight session, adding 1.6 percent, as investors returned to luxury goods maker Richemont and other recently battered firms.
The rand has already lost 2.5 percent this week. On Wednesday it was the worst performer of emerging market currencies tracked by Reuters and there might be no respite in the next few session, traders said.
By 1541 GMT, it was trading at 7.38 to the dollar, one percent weaker than Tuesday's New York close of 7.2995.
"There are too many gloomy signals from the global backdrop, with the focus closely on the euro zone," said Anisha Arora, emerging markets analyst at 4CAST.
"There is risk that dollar-rand could breach August highs around 7.500 with fresh negative news,"
Finance Minister Pravin Gordhan said South Africa was not in the same position as its BRICS partners who can afford to use reserves to buy debt of euro zone countries, a potentially bullish signal for the rand.
But the rand has strong support at 7.40 and a decisive break of this level could signal that further losses are in the offing.
Bond yields climbed further Wednesday, with the 2015 yield up 11.5 basis points to 6.96 percent after briefly hitting a fresh one-month low of 7.035 percent. The 2026 yield went up 2.5 basis points to 8.325 percent, off a session high of 8.445 percent.
"On a relative value basis, the panic selling is overdone in South Africa," said Di Luo, a fixed income strategist at HSBC in London. The steepening has created attractive entry levels and buying could resume when the currency weakness ebbs, she said.
STOCKS UP IN THIN TRADE
Trade on the bourse was thin, as concern about the European debt crisis kept many equity investors on the sidelines.
"A lot of guys are seeing the dark clouds on the horizon, but at the same time, a lot of (investors) are not prepared to sit in cash, so you are seeing a constant to-and-fro," said Devin Shutte, a stock trader at Newstrading.
The JSE's Top-40 index of blue chips rose 1.6 percent to 27,153.95. It is down 5.2 percent so far this year.
As of Tuesday's close, the Top-40 was the best performer among the indexes of the BRICS countries, or Brazil, Russia, India and China, in local currency terms.
Brazil and India are both down nearly 20 percent, with China down 12 percent and Russia down 11 percent.
The JSE's broader All-share index rose 1.4 percent to 30,459.82.
Richemont, the maker of Cartier watches and Mont Blanc pens, jumped 5.9 percent to 401.4 rand. The company has been hit hard in recent weeks by the surge in the Swiss franc, which eats into its overseas profits.
As of Tuesday's close Richemont was still one of the worst performers on the Top-40 this month, falling 6.5 percent.
Junior broker Sasfin Holdings tumbled nearly 5 percent to 30.51 rand, making it the worst performer on Johannesburg's All-Share index, after it reported a 16 percent drop in full-year earnings, hurt by non-banking businesses such as property private equity.
A total of 255 million shares changed hands on the exchange, the slowest day of trade this week. Advancers outnumbered decliners by a ratio of 2 to 1, with 83 shares unchanged.Wed, 14 Sep 2011
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