Rand firmer, but stocks decline

THE RAND firmed against the dollar and government bonds strengthened yesterday, shrugging off a credit downgrade by Moody’s of both local and foreign currency ratings as investors kept faith in the high yields on offer.

At 5.20pm, the rand traded at R12.7925 to the dollar, 1.21 percent firmer than its close of R12.9475 on Friday in New York.

In fixed income, the yield for the benchmark government bond due in 2026 dropped.

Investec chief economist, Annabel Bishop, said the rand and local currency debt were boosted by renewed risk appetite.

“The global risk-on phase has been aided by particularly low yields in developed economies offering a good differential,” Bishop wrote in a note.

“The inflows have strengthened the rand, proving the current risk-on cycle to be an opportune time to receive downgrades from a yield and currency perspective.”

Moody’s on Friday lowered South Africa’s rating by a single notch from Baa2 to Baa3, the bottom of the investment grade table with a negative outlook, citing an abrupt cabinet reshuffle and reduced growth prospects.

Meanwhile, stocks fell, led by rand hedge shares which came under pressure on a stronger rand.

The benchmark JSE Top40 index fell 1.54 percent to 45 168.67 points, while the all share index lost 1.25 percent to 51 564 points. British American Tobacco dropped 1.93 percent to R883.83.

Bourse heavyweight Naspers declined 5.89 percent to R2 525, after Chinese internet company Tencent Holdings, a third of which is owned by Naspers, came under pressure as Asian stocks began tracking the slump in US technology stocks.