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Rand tumbles as SA downgrade concerns return

Johannesburg - The rand weakened below R15/$ to the lowest in almost a month amid increasing expectations among economists that South Africa’s credit rating will be cut by the end of this year as growth falters.

The rand fell as much as 1.2% to R15.1568, the weakest since April 7 on a closing basis, before paring its losses to be little changed at 14.93 by 15:00. The currency has slumped 4.7% this week, the most out of 31 major and emerging-market currencies tracked by Bloomberg.

Yields on government rand-denominated bonds due December 2026 rose 1 basis point to 9.20, the highest in almost four weeks.

S&P Global Ratings, which is due to review its BBB- minus assessment on South Africa next month, will lower the nation’s rating to non-investment grade by the end of this year, according to 12 of 13 economists and analysts surveyed by Bloomberg.

Both the National Treasury and South African Reserve Bank forecast the economy will expand less than 1% this year. Three months of gains in the rand as a result of dollar weakness and improved investor sentiment may not have been fully warranted, said Ion de Vleeschauwer, chief dealer at Bidvest Bank.

“There was nothing supporting that recovery in the currency at all,” De Vleeschauwer said by phone from Johannesburg.

“Nothing fundamentally has changed and the market is realizing that June is around the corner, the downgrades are around the corner, and maybe South Africa is not such a safe bet after all.”

The start of Barclays' divestment from its African unit may also weigh on the currency, with the London-based bank saying Thursday it sold a 12.2% stake to money managers.

The move implies a potential outflow of as much as R15bn, depending on whether local or foreign buyers acquire the shares, Rand Merchant Bank said in note.


Rand takes a beating, heading back to R15/$ in May

South Africans should prepare themselves for more drastic shifts in the rand as the rating downgrade looms, an analyst has warned after the rand went from R14.23 to R14.72. FULL STORY

Junk status: A look into Sarb's crystal ball

There is a medium to high probability that South Africa’s debt will be downgraded to non-investment status, according to the SA Reserve Bank. FULL STORY

The South African conundrum – and why glass is still half full

An analyst traces how South Africa got to where it is today and where Zumafication will take it to, in a thesis with a surprisingly optimistic conclusion. FULL STORY

SA downgrade won't be train smash - economist

More downgrades of SA by ratings agencies will certainly not be a train smash, according to the head of fixed interest at Prudential Asset Management. FULL STORY

How SA could avoid junk status

There are ways SA could avoid a ratings downgrade to junk status and turn the tide on the decline, says Lesiba Mothata, chief economist at Investment Solutions. FULL STORY

Advice for investors ahead of ratings downgrade

Investors should “stick with their investment horizons and not be overly influenced by short-term noise” as the rest of 2016 will continue to be difficult, Novare has explained. FULL STORY




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