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Rand, stocks drop with focus on US response to China over Hong Kong

The rand treaded water for most the session and but saw some selling late on after the trade balance for April swung to a large deficit as exports tumbled.

Picture: Supplied.

JOHANNESBURG - The and weakened against the dollar early on Friday as investors waited to hear the latest US response to China tightening its control over financial hub Hong Kong.

At 1515 GMT, the rand traded at R17.5510 per dollar, 0.48% weaker, stepping back from a nine-week best of R17.3000 it reached on Thursday on optimism over recovering global growth.

Trade was cautious with risk takers on the fence ahead of an address by US President Donald Trump on China.

The rand treaded water for most the session and but saw some selling late on after the trade balance for April swung to a large deficit as exports tumbled.

The trade balance recorded a R35.02 billion ($2.01 billion) deficit from a revised surplus of R23.94 billion in March, with exports down 55.1% on a month-on-month.

“As significant as this number is, in terms of its shock value, the market impact will likely be blunted by the fact that the cumulative deficit for Jan-April is still a lot more modest than at the same time last year,” said Razia Khan, chief Africa economist at Standard Chartered.

“As mining activity gradually ramps up, albeit with COVID-related disruptions, we expect export performance to improve, while demand – and imports – will remain weak,” Khan said in a note.

Bonds were firmer, with the yield on the 10-year government bond was down 4 basis points at 8.895%.

The Johannesburg Stock Exchange (JSE) followed emerging markets to close the week on a jittery note ahead of Trump’s remarks.

The benchmark FTSE/JSE all share index was down 1.76% to end the day at 50,483 points and the top 40 companies’ index closed down 1.89% to 46,545 points.