MARKET WRAP: Rand hits six-week low as investors ponder SA’s growth prospects

The rand dropped to its weakest level in six weeks during intra-day trade on Monday, while the JSE snapped a five-day winning streak as investors mull over SA’s GDP growth prospects. 

The International Monetary Fund (IMF) cut SA’s growth forecast  for 2020 from 1.1% to 0.8% on Monday, citing structural constraints and the country's deteriorating public finances. Earlier in January the World Bank cut SA’s 2020 forecast from 1.5% to 0.9%.

Investec economist Annabel Bishop said in a note on Monday that the country’s deteriorating growth prospects, policy uncertainty and ailing state-owned entities continue to weigh on the rand, which began the year at R13.99/$.

“The rand is reflecting the severe weakness of the deteriorated state capacity, and is likely further factoring in the impact of a Moody’s downgrade on March 27, with the rand gaining little support from the high gold price reached in 2020 (R23,364/oz), as SA’s gold production capability has slipped, with declining electricity supply one of a number of contributors,” she said. 

At 5.19pm the rand had weakened 0.27% to R14.5088/$, 0.17% to R16.0804/€ and 0.25% to R18.848/£. The euro was 0.1% lower at $1.1083. The rand earlier reached the day’s worst of R14.57/$.

Gold was up 0.19% to $1,560.15/oz while platinum was down 1.09% to $1,015.12. Brent crude added 0.2% to $65.24 a barrel. The price of oil climbed to its highest level in almost two weeks on Monday morning after two large oil production bases began shutting down after forces loyal to Khalifa Haftar closed a pipeline in Libya. Haftar commands the Libyan National Army and used it to replace elected officials with military administrators in 2019.

“Although markets seem to be well supplied, such events remind investors that geopolitical risk remains an important factor in oil pricing. It is estimated that 800,000 barrels of crude supplies have been halted and if they don’t return fast, we may see a further rally in the days ahead,” said FXTM chief market strategist Hussein Sayed. 

Shortly after the JSE closed, the FTSE 100 was down 0.24% and France’s CAC 40 0.31%, while Germany's DAX had added 0.15%. US markets were closed for Dr Martin Luther King Day. 

Earlier, the Shanghai Composite gained 0.66% and Japan’s Nikkei 225 0.18%, while Hong Kong’s Hang Seng fell 0.9%. 

The JSE all share closed 0.26% lower at 58,850.4 points and the top 40 lost 0.18%. Banks relinquished 0.49%, while gold miners climbed 3.22%. 

Sibanye added 4.85% to R41.10, Gold Fields 4% to R92.97, Harmony 2.45% to R52.35 and Anglogold Ashanti 2.06% to R304.99.

Intu Properties said on Monday that it was targeting an equity raise in February as it looks to fix its balance sheet. Its share price rose 1.88% to R4.34. It is, however, still down more than 30% so far in January. 

Anglo American said earlier that it had made a formal cash offer of £404.9m (R7.6bn) for UK-based company Sirius Minerals. Anglo American’s share price gained 0.26% to R425.29, its highest close since the 2008 financial crisis.

mjoo@businesslive.co.za