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#RandReport: Rand tumbles as recession dims investor sentiment, stocks falter

At 1605 GMT, the rand traded 0.77% weaker at 15.4725 versus the dollar, after hitting a low of 15.6925 earlier in the session.

Picture: Supplied.

JOHANNESBURG - The rand remained on the back foot on Wednesday after hitting a two-year low as the effects of dipping into recession dented investor risk sentiment.

At 1605 GMT, the rand traded 0.77% weaker at 15.4725 versus the dollar, after hitting a low of 15.6925 earlier in the session.

A contraction of 0.7% in the second quarter announced on Tuesday pushed South Africa into recession for the first time since 2009, dealing a blow to President Cyril Ramaphosa’s efforts to revive the economy after a decade of stagnation.

Statistics South Africa also said the economic contraction in the first quarter was steeper than initially recorded, at 2.6%.

Tuesday’s GDP figures led many economists to cut their full-year growth forecasts for South Africa.

“South Africa’s fiscal challenges will remain a constraint on the economy for some years to come. We now forecast real economic growth of only 0.7% in 2018, previously 1.1% compared to 1.3% in 2017,” an NKC African Economics analyst said in a note.

Appetite for rand assets has also been dented by the financial turmoil in Turkey and Argentina and a growing threat of a spillover from a trade war between Washington and Beijing.

The yield on the benchmark rand-denominated government bond due in 2026 rose two basis points to 9.23%.

The bourse was led lower by banks, with the top 40 index was down 1.66% to 50,833 points, while the all share index closed 1.36% lower at 57,102.

The banking index fell 2.85% led by Nedbank which closed 5.01% down at R255.

“Emerging markets are in contagion and the rand is quite weak. We still haven’t recovered from the GDP figures which were quite a surprise,” said Greg Davies, trader at Cratos Capital.

Market heavyweight Naspers fell 4.02% in tandem with Chinese gaming firm Tencent which was down 4.08%.

Steinhoff bucked the negative trend, rising 5.73% after former chief executive Markus Jooste’s appearance at a parliamentary inquiry, claiming no knowledge of any accounting irregularities at the time of his departure in December.

“I don’t think he said much to move the share price. I suppose since we have had no action towards Steinhoff or management at least the wheels of some sort of action are starting to move,” said Davies.

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