Banks bear the brunt of weak­ened cur­rency

Cur­rent ac­count deficit widens amid fears that the trade truce be­tween the US and China will be short-lived

Cape Times - - BUSINESS REPORT - KABELO KHU­MALO kabelo.khu­[email protected]

SOUTH African banks bore the brunt of the weaker rand after the third-quar­ter cur­rent ac­count deficit widened to R176.6 bil­lion from R167bn and con­tin­ued fears that the truce in the trade spat be­tween the US and China will be short-lived hurt sen­ti­ment.

The rand reached a day’s low of R14.11 from a day’s high of R13.85, weighed down by the soft cur­rent ac­count print, geopol­i­tics, load shedding and par­lia­men­tary ap­proval to amend Sec­tion 25 of the Con­sti­tu­tion.

The key bank in­dex plunged 3.28 per­cent to 8 850 points, and 18 per­cent down from a year high of 10 848 points.

Stan­dard Bank shed 3.29 per­cent to R172.80, while Absa lost 3.36 per­cent to R154.14 and Ned­bank was down 3.14 per­cent to R257.87. The coun­try’s big­gest bank by mar­ket cap­i­tal­i­sa­tion, FirstRand, was 3 per­cent weaker at R66.25 while Capitec shed 2.01 per­cent to R1069.04.

The plunge in the banks in­dex saw the all share in­dex close the trad­ing ses­sion 2.07 per­cent in the red at 50 641 points, while the bench­mark Top 40 in­dex lost 2.38 per­cent to 44 589 points. Lo­cal mar­kets have been bat­tered since the all share in­dex reached a record high of 61 684 in Jan­uary as Ramapho­ria wave swept through the mar­kets.

Nkareng Mpobane, the chief in­vest­ment of­fi­cer at Ash­bur­ton In­vest­ments, said it had been an ex­tremely chal­leng­ing pe­riod in the mar­kets, with in­vestors dis­il­lu­sioned.

“Gi­ants such as MTN, As­pen and Tiger Brands de­clined by over 40 per­cent dur­ing 2018, while a few other well-re­garded names fell more than 30 per­cent. Naspers lost about a fifth of its value since the be­gin­ning of the year and even the ever-pop­u­lar prop­erty sec­tor fell by a sim­i­lar amount,” Mpobane said.

Third quar­ter cur­rent ac­count data did lit­tle to up­lift sen­ti­ment with the deficit wi­den­ing to 3.5 per­cent of gross do­mes­tic prod­uct (GDP) from 3.4 per­cent in the prior quar­ter.

Wil­liam Jack­son, the chief emerg­ing mar­kets econ­o­mist at Cap­i­tal Eco­nomics, said the pick-up in GDP growth in the third quar­ter and hawk­ish lan­guage from the Re­serve Bank made it more likely than not that in­ter­est rates would be raised again soon. “The larger-than-ex­pected South African cur­rent ac­count deficit in the third quar­ter, of 3.5 per­cent of GDP, adds to the rea­sons to think that the Re­serve Bank will tighten mon­e­tary pol­icy a lit­tle fur­ther in the next few months,” said Jack­son.

The SA Rev­enue Ser­vice said last week that the trade deficit had widened to R5.5 bil­lion in Oc­to­ber. It was the largest trade gap since Jan­uary, as im­ports rose faster than ex­ports.

Data from the Stan­dard Bank pri­vate sec­tor ac­tiv­ity sur­vey also showed ex­port or­ders in Novem­ber had dropped at the fastest rate in 18 months, which re­sulted in firms cut­ting in­ven­to­ries to their low­est level since July 2014.

SIM­PHIWE MBOKAZI African News Agency (ANA)

THE RAND reached a day’s low of R14.11 from a day’s high of R13.85, weighed down by the soft cur­rent ac­count print, geopol­i­tics, load shedding and par­lia­men­tary ap­proval to amend Sec­tion 25 of the Con­sti­tu­tion. |

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