Rate decision weighs on JSE

Johannesburg - South African stocks fell on Thursday and bonds weakened, partly rattled by an unexpected central bank decision to leave interest rates unchanged, but the rand recouped some of its earlier losses against the dollar.

At 17:46, the rand traded 0.46% firmer at 8.01 against the dollar compared to Wednesday's close at 8.05.

It was up from 8.0890 before central bank Governor Tito Mboweni announced the monetary policy committee had opted to leave the key repo rate steady at 7.5%.

"Although the decision is a negative for bonds, and a negative for equities, the rand should benefit from its continued yield attraction," said Standard Chartered analyst Razia Khan.

Thursday's decision followed an unwinding cycle that saw 450 basis points worth of cuts since December, after the central bank had lifted rates by 500 basis points between June 2006 and June 2008 to fight inflation. The market had expected another 50 basis point cut this time around.

The JSE Top-40 index fell 1.25% to 19 966.04 points, while the broader all-share index dropped 1.05% to 22 156.17 points, also taking their cue from weaker European markets.

"The market was a little bit surprised by the Reserve Bank decision and we've seen a bit of a sell-off coming through," Desmond Reilly, a trader at PSG Online Securities said, adding weaker European markets also had an affect on the local market.

Kumba Iron Ore, a unit of global miner Anglo American, dropped 4.59% to R182.71 and platinum producer Lonmin lost 3.70% to R156.

Other mining shares also dropped. Bourse heavyweight BHP Billiton was down 4.40% to R176.81 and rival miner Anglo American shed 2.08% to R235.

Government bonds also fell after the rates decision, pushing yields higher, with the 2015 bond yield last trading at 8.505 percent, up 16.5 basis points on the day, compared to around 8.4% prior to the rates announcement.

The yield on the long-dated 2036 note was at 8.61%, up 9.5 basis points from Wednesday's close, compared with 8.575% before Mboweni's speech.

The JSE banking sector, which is sensitive to interest rates, fell 0.78%, led by Nedbank which lost 3.01% to R93.10 and African Bank Investments Ltd was down 2.88% to R25.64.

PPC, Africa's biggest cement maker, lost 3.40% to R28.43 after the Competition Commission announces on Thursday it has raided the businesses of the country's largest cement maker as part of a broader investigation on price-fixing.

- Reuters