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#RandReport: MTN leads stocks lower, rand at 7-week high

The rand traded at 15.4200 versus the dollar at 1638 GMT, from Thursday's New York close.

South African money. Picture: Gadeeja Abbas/EWN
Rand,the rand
Business Local

JOHANNESBURG – South African stocks fell more than two percent on Friday dragged lower by telecoms firm MTN Group after it flagged sharply lower full-year earnings.

The rand was little changed at a seven-week high as firming US inflation rekindled prospects of a Federal Reserve rate hike, a move that could tighten global liquidity.

MTN closed 18 percent lower at 126 rand after saying its annual profits would suffer due to an underperformance in its biggest market, Nigeria.

“If you consider that the numbers are purely on bad trading and not with the fine, it reflects a lot of problems because Nigeria is where most of income comes from,” an analyst at Sasfin Holdings, David Shapiro, said.

Construction firm Aveng Ltd shed 12.9 percent to R2.83 after saying it would swing to a first half-loss.

The benchmark Top-40 index fell 2.2 percent to 43,474 points while the All-Share index slipped 1.84 percent to 48,940 points.

On the foreign exchange market, the rand traded at 15.4200 versus the dollar at 1638 GMT, from Thursday's New York close.

Inflation is being watched for clues on whether the Fed would continue raising interest rates this year after the US central bank lifted borrowing costs in December for the first time in nearly a decade.

“The Fed is watching incoming data very carefully. They are looking for two things: CPI and wage data. Both have shown significant progress, so interest rate hikes are probably on the cards,” said Rand Merchant Bank's interest rate derivatives specialist Andre Eerenstein.

The domestic backdrop is particularly challenging for the local currency given faltering growth, the worst drought in over a century, low business and consumer confidence and a looming credit rating downgrade to “junk” status.

Finance minister Pravin Gordhan will pull out all the stops in his upcoming budget to reassure ratings agencies the country will repay its debts promptly and avoid any credit downgrades.

In fixed income, government bonds weakened with the yield for the benchmark instrument due in 2026 adding 9 basis points to 9.175 percent.

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