JSE rises, rand succumbs to forex buying
Johannesburg - South Africa’s stocks were up more that 1%
while bonds gained as foreigners bought local debt, attracted by higher yields.
Despite offshore interest in bonds, the rand recorded its
biggest weekly loss in six weeks. It was on the back foot partly due to Reserve
Bank buying of foreign exchange.
It will likely keep its weaker tone as worries that Greece
might not pass austerity measures needed for the country to secure loans kept
investors hesitant to pile on risky assets.
A heavy sell-off in the previous session attracted bargain
hunters, with the blue-chip Top-40 index up 1.4%, its highest daily gain in
almost a month.
Yields on local bonds fell to multi-week lows on the short
end. The yield on the 2015 bond hit two week lows at 7.425% and was last at
7.43%. The 2026 yield fell 7.5 basis points to 8.545%.
Undeterred by a generally negative sentiment towards risky
assets, foreigners had bought R1.7bn worth of local bonds by end Thursday.
"I think the buying has a lot to do with our debt metrics,
which are better than Europe's. They are happy about our economy and our
deficit," said a bond dealer. "There’s also a good spread over the US tenure,"
South Africa’s budget deficit widened to 5% of GDP in
2010/11 with plans to trim it to around 4% in the next three years. Moody’s
said on June 9 there was little to put downward pressure on sovereign ratings
The spread between the 10 year benchmark and its US
equivalent has widened by 29 basis points since the beginning of June to
5.161%. Just on Friday, it narrowed by four basis points as foreigners bought
Rand on back foot
The risk aversion prevailing in global markets added to the
rand woes, as the currency was already under pressure from central bank buying
since it hit two-week highs at R6.70/$ this week.
In early evening trade, the rand was trading at R6.89/$,
0.7% weaker than Thursday’s New York close of R6.8425/$.
It was in the bottom three of the worst performers among
emerging market currencies and there might be no respite next week.
“The rand has underperformed for the last two sessions, with
central bank pressures,” said Christopher Shiells, emerging market analyst at
“Next week, the rand’s direction will depend on Greek
sentiment and at the moment there is a cloud of uncertainty hanging over the
The rand has struggled to break the R6.92/$ level after two
attempts this week and should it pierce it, it will aim for R6.96/$, which is
its 200-day moving average.
On the bourse, the All Share [JSE:J203] Index was up 1.2%.
“There was obviously a huge recovery after a bad few days.
The story at the moment is all about Greece and positive comments last night
boosted the international markets and we followed suit,” said Michael Carlsson,
a trader at Consilium Capital.
“The resources performed very well after being punished
perhaps too much the past few days.
Mining heavyweight BHP Billiton [JSE:BIL] gained but gold
miners extended losses as the price of bullion dropped to one-month lows.
The index of gold miners eased 0.5% after falling to its
lowest level in nearly a year during the previous session.
Value investors snapped up shares of firms such as internet
and media giant Naspers [JSE:NPN], which went up 1.99% to R368.30.