Rand hits 1-month high on Moody’s move

THE RAND raced to a one-month high against the dollar yesterday and government bonds firmed as investors cheered Moody’s decision to change the country’s credit outlook to stable from negative.

Moody’s late on Friday affirmed South Africa’s debt at “Baa3”, the lowest rung of investment grade, saying the previous weakening of national institutions was gradually reversing and this was supporting an economic recovery.

While the decision to affirm the rating was widely anticipated by market participants, the unexpected move to revise the outlook lifted sentiment.

At 5pm, the rand bid at R11.6581 to the dollar, 11.23 cents firmer than at the same time on Friday.

In fixed income, the yield on the benchmark 2026 paper was down 7.5 basis points to 7.915 percent, reflecting the strongest bond prices since early 2015.

“What surprised markets on Friday is that Moody’s upgraded the rating outlook from negative to stable – which means that a downgrade is no longer likely even in the medium-term, unless of course new developments overtake us,” Commerzbank analysts said in a note.

On the bourse, banks bucked the weaker trend on the broader market, rising 0.61 percent to 10 192.17 points.

The all share index fell 0.41 percent to 56 176.43 points, while the Top40 index was down 0.38 percent to 49 566.23 points.

Banks, considered the barometer of both political and economic sentiment, have largely borne the brunt of previous credit ratings downgrades given their substantial exposure to sovereign debt and various state-owned companies.

Construction firm Murray & Roberts was the most notable mover on the equity market, climbing 45.54 percent to R14.03 at the close after Germany’s ATON said it planned to make a buyout offer.

“In the scheme of things, that is positive for Murray & Roberts. Like many others in the construction space they have been under pressure because the infrastructure spending in the country has dwindled. It should help them get back on track,” said Ryan Woods, a trader at Independent Securities.

Naspers remained under pressure, down 0.63 percent to R3 130 following the sale of a 2 percent stake in Tencent last week.