Rand plunges on Gigaba statement

The JSE all share closed firmer on Wednesday as rand hedges and miners rallied on the weaker rand following Finance Minister Malusi Gigaba’s medium-term budget policy statement.

The JSE pushed to within 70 points of a record high in intra-day trade.

Brent crude was 0.45% lower at $58.16 a barrel soon after the JSE’s close.

Gigaba’s statement revealed a higher budget deficit and lower growth projections for the next three years, which is likely to lead to a ratings downgrade later in 2017.

Interest-rate sensitive domestic stocks including banks, property and retailers, closed sharply weaker as the falling rand is likely to add to inflation, thereby reducing the chances of further interest-rate cuts by the Reserve Bank.

The all share gained 0.38%, to 58,123.1 points and the top 40, 0.5%. Gold miners added 1.97%, platinums 1.89%, industrials 0.87%, and resources 0.51%. The property index fell 1.56%, banks 1.11%, and financials 0.95%.

Sasol lifted 1.67%, to R400. Rand hedge British American Tobacco stood out, gaining 3.48% to R904, while Richemont added 3.17%, to R127.50. MTN shed 2.73%, to R124.50. Hyprop was among the worst hit property stocks, closing 2.58% lower at R104.01. Woolworths dropped 1.14%, to R56.41.

The rand weakened to a fraction under R14.11 to the dollar in early evening trade, more than 2.3% weaker than the Tuesday’s close of R13.77. This was its worst level since December 2016. The rand had earlier lost about 26c to the dollar while Gigaba spoke, with markets quickly digesting the news that the budget deficit would grow to 4.3% of GDP.

The rand lost more than 3.2% to the pound, and was last seen at R18.65.

With the projected rise in the deficit to 4.3%, from the 3.1% target set in the February budget, spending will be R3.9bn higher than expected. Revenue is expected to fall short by R50.8bn, with GDP growth for 2017 being revised down from 1.3% to 0.7%.

Domestic bonds were sharply weaker, with the R186 last bid at 9.17%, from 8.835%.

The top-40 Alsi futures index gained 0.49%, to 52,439 points.