Rand and JSE gain but risks remain

The rand gained the most in three weeks on Monday, while the JSE closed firmer amid mixed global peers as investors welcomed the Chinese economy opening up.

The local currency gained around 2% earlier, reaching an intraday best of R17.1456/$, as China eased its stringent Covid-19 restrictions and as President Cyril Ramaphosa filed court papers challenging the parliamentary panel report that would lead to a debate about his potential impeachment.

Ramaphosa wants the report of the Ngcobo panel reviewed and set aside by the Constitutional Court.

“Risks still abound and the rand consequently remains above R17/$,” Investec economist Annabel Bishop said, adding that the rand will “remain at risk from domestic politics”.

Chinese authorities accelerated a shift towards reopening the economy at the weekend, with Shanghai and Hangzhou — home to tech giant Alibaba — easing some Covid-19 restrictions after protests last weekend. These two cities join other top-tier cities such as Beijing in relaxing curbs in recent days.

“The rand gained as risks subsided slightly, with its continued recovery aided by China increasingly loosening its zero-tolerance stance against Covid-19 over the past weekend, reducing some of the fears about a harsher global economic slowdown than originally feared,” Bishop said.

At 5.59pm, the rand had strengthened 1.19% to R17.3383/$, 1.36% to R18.2352/€ and 1.65% to R21.1757/£.

The euro was unchanged at $1.0523.

Investors are looking ahead to next week’s US Federal Reserve interest rate decision at the conclusion of the central bank’s December policy meeting. After a speech last week by Fed chairman Jerome Powell, markets largely expect the central bank will hike interest rates by 50 basis points, which will mark an easing from four straight 75 basis points hikes.

“Emerging-market economies face the additional risk of an increase in risk aversion and global financial markets if the Fed’s monetary policy does prove too restrictive, which will add a weak underpin to the rand,” Bishop said.

The JSE all share gained 0.5% to 74,693 points and the top 40 added 0.45%. The industrial metals and mining index rose 2.14%, banks collected 1.27%, financials garnered 1.1% and resources were up 1.03%.

At 6.15pm, the Dow Jones industrial average was 0.75% weaker, while markets were mixed in Europe.