ARCMITTAL:  356   0 (0.00%)  18/10/2018 00:00

South African rand falls to one-year low on downgrade fears

(Updates with latest level throughout)

JOHANNESBURG, Nov 10 (Reuters) - South Africa's rand slipped to a one-year low on Friday as fears of a ratings downgrade resurfaced on reports President Jacob Zuma is preparing to introduce free tertiary education, which would put added pressure on public finances.

Stocks were weaker as fixed-line operator Telkom weighed.

The rand was 0.58 percent weaker against the dollar at 14.3225 as of 1540 GMT, after earlier being down more than 1 percent to a session low of 14.4200 - a level last hit on Nov. 21 last year.

Philip Pearce, a currency dealer at TreasuryOne, said traders were betting that the rumours about higher education spending - as reported in South African newspapers this week - were true.

"If free education goes through the market thinks ratings agencies will definitely downgrade South Africa," he said.

South Africa's government was considering a range of budget cuts that could include slashing social grants for the most vulnerable in order to pay for free tertiary education, a newspaper reported on Friday.

South Africa is staring down the barrel of ratings downgrades after the Treasury last month widened budget deficit estimates and lowered this year's economic growth forecast.

S&P and Moody's are scheduled to review South Africa on Nov. 24.

Government bonds also weakened, with the yield for the benchmark paper rising 6 basis points to 9.355 percent.

On the stock market, the benchmark Top-40 index retreated 0.2 percent to 53,424 points, while the broader All-share index slid 0.1 percent to 59,776 points.

Telkom reported a drop in half-year profits and cut its dividend as a result of reduced spending by corporate and government customers, sending its share price sharply lower.

Shares in Telkom, in which the state owns a stake of around 40 percent, were down 6.4 percent at 50.50 rand.

ArcelorMittal South Africa was the biggest loser on the bourse after it flagged lower steel demand in the current quarter as it updated the market on its performance in the three months to end-September.

The steelmaker's shares fell 8.9 percent at 5.97 rand. (Reporting by Alexander Winning and TJ Strydom; Editing by Joe Brock)

2017-11-10 17:40:49

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