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Johannesburg - The rand registered its biggest daily fall in two years against the dollar on Tuesday, with more losses seen, as fears of a radiation disaster in Japan prompted a flight from risk.
But Wall Street managed to recover some of its steep losses on Tuesday, following a disastrous day on most world markets.
Johannesburg stocks tumbled more than 2%, booking their biggest two-day fall since August, as fears about the crisis in the world's third-largest economy sent investors scrambling for safe-haven US and German bonds.
The rand plunged over 3% to R7.0325/$, its weakest level since February 25, after a nuclear power plant crippled by Friday's devastating earthquake exploded and sent low levels of radiation floating towards Tokyo. It was trading at R7.0050/$ in the late afternoon from Monday's New York close of R6.8143/$.
Analysts said the currency could weaken further, having broken through R7/$, if Japanese investors respond to the disaster by repatriating overseas assets.
"The recent events in Japan will add an additional concern, namely disinvestment from emerging markets uridashi as Japanese households aim for liquidity as the crisis worsens," Societe Generale said in a note.
Uridashi are foreign-currency bonds sold to Japanese retail investors, many of whom are expected to bring their cash home following last week's disasters.
Japan has about $15 trillion in household assets, with most of that parked in non-yielding bank deposits. Japanese have long invested in uridashi and other instruments that pay higher interest rates than local banks.
"I don't think 7.05 (rand to the dollar) is untoward right now and I wouldn't be incredibly bearish calling for the rand significantly weaker," said Trevor Barsdorf, analyst at ETM, noting that lower commodity prices were also hurting the rand.
Stocks stung
On the SA bourse, resources firms such as African Rainbow Minerals were among the hardest hit, as the widening crisis in Japan sent metals prices sharply lower.
Resource-hungry Japan is a major destination for South African exports, notably of semi-processed metals, said Nomura International emerging markets economist Peter Attard Montalto.
"South Africa stands out in particular for its very strong dependence on Japan as an export market," he said.
The benchmark Top-40 index of blue-chip stocks fell 2.4% marking its biggest two-day fall since August. The broader All-share index fell 2.2%.
African Rainbow Minerals, a miner with assets in platinum group and base metals and in coal, tumbled 5.1% R192.00.
Platinum prices fell 3.5% as major Japanese automakers halted production. The precious metal is used in jewellery and in catalytic converters for cars.
Gold, usually seen as a safe-haven investment, fell 3%, as worried investors ran to cash. Global gold miner AngloGold Ashanti fell 1.1% to R315.50.
South African shares have been squeezed after hitting a record high last month, prompting some fund managers and analysts to say it was time to begin shifting money into developed markets, which looked relatively cheap.
Critically, foreign investors have now turned net sellers of South African stocks. After net buying a whopping R36bn worth of local stocks in 2010, overseas investors have sold a net 144 million shares in 2011, data from bourse operator JSE Ltd.
"It's definitely a concern," said Mitchell Gannaway of Thebe Securities about the turn to net selling. "However, we do need to see the longer-term trend first."
Bonds were firmer although they gave up some of their gains as the rand weakened over the session.
The yield on the 2015 bond was down 2.5 basis points to 7.81% while the yield on South Africa's 2026 bond was down 5.5 basis points at 8.93%.
Wall Street
US stocks pulled back on Tuesday after steep early losses sparked by fears of meltdowns in a Japanese nuclear power plant.
The Dow index and the Nasdaq ended down 1.2% at the closing bell.
But Wall Street managed to recover some of its steep losses on Tuesday, following a disastrous day on most world markets.
Johannesburg stocks tumbled more than 2%, booking their biggest two-day fall since August, as fears about the crisis in the world's third-largest economy sent investors scrambling for safe-haven US and German bonds.
The rand plunged over 3% to R7.0325/$, its weakest level since February 25, after a nuclear power plant crippled by Friday's devastating earthquake exploded and sent low levels of radiation floating towards Tokyo. It was trading at R7.0050/$ in the late afternoon from Monday's New York close of R6.8143/$.
Analysts said the currency could weaken further, having broken through R7/$, if Japanese investors respond to the disaster by repatriating overseas assets.
"The recent events in Japan will add an additional concern, namely disinvestment from emerging markets uridashi as Japanese households aim for liquidity as the crisis worsens," Societe Generale said in a note.
Uridashi are foreign-currency bonds sold to Japanese retail investors, many of whom are expected to bring their cash home following last week's disasters.
Japan has about $15 trillion in household assets, with most of that parked in non-yielding bank deposits. Japanese have long invested in uridashi and other instruments that pay higher interest rates than local banks.
"I don't think 7.05 (rand to the dollar) is untoward right now and I wouldn't be incredibly bearish calling for the rand significantly weaker," said Trevor Barsdorf, analyst at ETM, noting that lower commodity prices were also hurting the rand.
Stocks stung
On the SA bourse, resources firms such as African Rainbow Minerals were among the hardest hit, as the widening crisis in Japan sent metals prices sharply lower.
Resource-hungry Japan is a major destination for South African exports, notably of semi-processed metals, said Nomura International emerging markets economist Peter Attard Montalto.
"South Africa stands out in particular for its very strong dependence on Japan as an export market," he said.
The benchmark Top-40 index of blue-chip stocks fell 2.4% marking its biggest two-day fall since August. The broader All-share index fell 2.2%.
African Rainbow Minerals, a miner with assets in platinum group and base metals and in coal, tumbled 5.1% R192.00.
Platinum prices fell 3.5% as major Japanese automakers halted production. The precious metal is used in jewellery and in catalytic converters for cars.
Gold, usually seen as a safe-haven investment, fell 3%, as worried investors ran to cash. Global gold miner AngloGold Ashanti fell 1.1% to R315.50.
South African shares have been squeezed after hitting a record high last month, prompting some fund managers and analysts to say it was time to begin shifting money into developed markets, which looked relatively cheap.
Critically, foreign investors have now turned net sellers of South African stocks. After net buying a whopping R36bn worth of local stocks in 2010, overseas investors have sold a net 144 million shares in 2011, data from bourse operator JSE Ltd.
"It's definitely a concern," said Mitchell Gannaway of Thebe Securities about the turn to net selling. "However, we do need to see the longer-term trend first."
Bonds were firmer although they gave up some of their gains as the rand weakened over the session.
The yield on the 2015 bond was down 2.5 basis points to 7.81% while the yield on South Africa's 2026 bond was down 5.5 basis points at 8.93%.
Wall Street
US stocks pulled back on Tuesday after steep early losses sparked by fears of meltdowns in a Japanese nuclear power plant.
The Dow index and the Nasdaq ended down 1.2% at the closing bell.
