Johannesburg - The rand weakened against the dollar early on
Tuesday, pressured by a bleak global growth outlook after soft Chinese data,
while bonds firmed slightly as investors awaited the results of a weekly debt
auction likely to be dominated by offshore buying.
The rand was weighed down by weak Chinese June import data
which showed imports grew at half the expected pace - a slowdown that is likely
to cause a deterioration in South Africa’s current account deficit as exports
Over 35% of South Africa’s exports go to Asia, against 25%
to the eurozone.
The weak Chinese data signals a bigger gap in South Africa’s
trade account, which drove the current account to its worst level in over three
years in the first quarter.
The rand weakened 0.3% to R8.2414/dollar at 06:44 GMT but
was within Monday’s trading range and firmer than the previous session's low of
"The Chinese data is impacting general risk appetite, but
also more acutely South African assets due to the trade ties," said Christopher
Shiells, emerging market analyst at Informa Global Markets.
Yields on government bonds nudged lower to 5.94% on the 2015
and 7.865% on the 2026 issue.
The Treasury is looking to sell R800m of its 2031 bond,
R800m of the 2023 and R500m of the 2018 at a weekly auction.
Offshore investors, who bought over R20bn of local debt last
month and drove yields to record lows, are expected to pick up the most stock.
“We continue to see strong foreign demand for South African
bonds. We expect these inflows to persist over the coming months in the run up
to the WGBI reset in October,” said Absa Capital in a note to investors.
South African bonds are due to be included in the Citigroup
World Government Bond Index (WGBI) on October 1, the main factor behind
sustained foreign inflows into the local debt market in the last few months.
Results of the auction will be out after auction closes at