KUMBAIO: 38,173 -1321 (-3.34%)
South Africa's rand tepid ahead of annual budget speech
(Updates prices, adds stocks)
JOHANNESBURG, Feb 19 (Reuters) - South Africa's rand inched
lower on Tuesday, with investors pricing in domestic risks ahead
of the annual budget where the financial crisis at state power
utility Eskom is set to be addressed.
At 1502 GMT, the rand was 0.09 percent weaker at
14.1475 per dollar, compared with its overnight close of 14.1350
in New York.
The rand has tumbled more than 6 percent since ailing power
supplier Eskom resumed nationwide electricity blackouts last
Monday over technical issues at its creaking fleet of coal-fired
Most of Eskom's debt of about 420 billion rand ($30 billion)
is under government guarantee, a major risk to the country's
sovereign credit rating which is ranked at junk status by two of
the top three ratings firms.
Eskom expects to make annual losses of around 20 billion
rand this year, and Finance Minister Tito Mboweni is set to
announce a bailout for the firm during his budget speech on
Wednesday in parliament.
"The composition of Eskom's rescue package is of particular
significance to markets," Peregrine Treasury Solutions Corporate
Treasury Manager Bianca Botes said in a note.
Bond prices rose. The yield on the benchmark 2026 paper
edged lower to 8.87 percent, from Monday's close of
On the bourse, stocks struggled to stay positive after a
buoyant start to the week, along with emerging market peers as
investors awaited outcomes from the U.S.-China trade talks to be
held in Washington this week.
Weak company results and profit warnings also contributed to
The Johannesburg All-share index closed 0.12
percent weaker to 55,194 points, while the Top-40 index
weakened 0.13 percent to 48,956 points.
EOH Holdings topped the decliners, plunging 16.37
percent at 14.61 rand after a report by Tech Central news site
that Microsoft's decision to cut ties with the technology
company was linked to a tip-off about a contract with South
Africa's defence department.
Reuters has not verified the news site's story. EOH said it
could not respond each time the media published information but
shareholders would be provided with responses to relevant media
coverage as appropriate, subject to legal advice.
It said the Microsoft investigation formed part of EOH’s
larger internally-initiated investigation into all public sector
contracts over the last five years, and urged shareholders to
"exercise caution" when dealing in the company’s securities
until a further announcement.
EOH said last week Microsoft was terminating its channel
partner agreement with EOH's subsidiary.
The operator of low-fare airline kulula.com and British
Airways in South Africa, Comair fell 0.17 percent to
5.74 rand after reporting a 38 percent decline in half-year
headline earnings per share.
While Kumba Iron Ore Ltd weakened 2.64 percent to
376.30 rand after reporting lower full-year headline earnings
per share, compared to 2017, when the firm had benefited from
the positive impact of an impairment reversal.
($1 = 14.1343 rand)
(Reporting by Mfuneko Toyana and Nqobile Dludla;
Editing by Alison Williams)
© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.