JOHANNESBURG: South Africa’s rand was weaker against the dollar on Thursday ahead of ratings decisions that could see the country’s debt downgraded to junk and kicked-out of global indices, triggering a massive selloff of local assets.
Stocks were down as Sasol and Naspers weighed.
At 1515 GMT the rand had weakened 0.72 percent to 13.9025 per US dollar from a close of 13.8000 in New York on Wednesday.
The rand had opened on the back foot against the dollar following more dovish than expected minutes from the U.S Federal Reserve and worries over potential downgrades to “junk” of South Africa’s local credit ratings.
Moody’s and S&P Global Ratings are due to announce their rating decisions on Friday. A one-notch cut in the local-currency rating by both agencies would be likely to trigger forced selling of up to $12 billion of the country’s bonds.
Fitch, which already rates both South Africa’s local and foreign currency debt a notch below investment grade, kept its rating and stable outlook unchanged last Friday.
The rand hardly moved after central bank kept its benchmark repo rate at 6.75 percent on Thursday, citing the increased risks of inflation posed by currency weakness, possible credit downgrades and political jostling.
Bonds were firmer, with the yield on the benchmark paper due in 2026 down 5.5 basis points to 9.345 percent.
On the stock market, the benchmark Top-40 index was down 0.9 percent at 53,996 points, while the broader All-share index declined 0.8 percent to 60,298 points.
Shares in Sasol fell 1.6 percent to 432.10 rand after the petrochemical firm said it would pull out of all its gas-to-liquids Greenfield projects including one in Louisiana expected to cost $13 billion to $15 billion.
E-commerce firm Naspers, which owns a third of China’s TenCent, declined for a second straight day snapping a rally in which it hit all-time highs for five consecutive sessions.
Shares in the Naspers, the largest company with a primary listing on the JSE, declined 4.1 percent to 3,741.75 rand.
Technical factors also weighed, with Thomson Reuters data showing momentum indicators for the main indices had strayed into overbought territory earlier this week. Such moves often herald a downward correction in the market.
Source: Brecorder.com
