MARKET WRAP: Rand hits R15/$ as virus wreaks havoc in global markets

January saw the rand record its biggest monthly drop since August 2018 as the global risk-off environment and investor anxiety about SA’s economic growth prospects saw it fall by degrees last seen during the Turkey and Argentina currency crisis.

The rand dropped more than 7% against the dollar in January, making it the worst performing among emerging-market currencies polled by Bloomberg over the past month, followed by the Chilean peso, which fell close to 6%.

The coronavirus outbreak that started in China has raised fears about the effect it could have on the world’s second-largest economy, with the rand taking a battering as China is the biggest buyer of the products SA mines. Some countries, including the US, have now restricted travel after the World Health Organisation (WHO) deemed the virus, which had claimed 213 lives by Friday, a global health emergency.

“The worrying thing is how much worse the numbers could look when the markets re-open next week, given just how rapidly they’re rising. Huge efforts are being made to contain the virus, yet the numbers [of those infected] are already massive,” said Oanda senior market analyst Craig Erlam.

The rand’s losses were worsened by the implementation of load-shedding on Thursday. The rolling blackouts continue to pose a threat to domestic economic growth and the performance of the rand. In the month ahead, finance minister Tito Mboweni’s budget is the most anticipated event by investors as they await any signs regarding the government’s plans to address SA’s dire fiscal situation.

At 7.44pm, the rand had weakened 1.43% to R14.9719/$, 1.87% to R16.5868/€ and 2.22% to R19.7563/£. The euro had firmed 0.44% to $1.1079.

The rand broke through R15/$ briefly on Friday evening, reaching a worst of R15.0121. It last reached these levels in November. It was down more than 4% to the dollar for the week, making this its worst since September 2018. The 7.04% it has lost in January more than wipes out all of 2019’s gains, which amounted to 2.46%.

“With limited data released during the day, the weakness is attributed to the continued selloff of emerging-market assets as panic surrounding the coronavirus continues to grip markets, resulting in a flight from riskier assets, following the WHO declaring the virus outbreak a global health emergency,” said Peregrine Treasury Solutions’ treasury partner Bianca Botes. “The weakness in the rand specifically has been aggravated by the rolling blackouts implemented by Eskom [on Thursday], and set to continue throughout the weekend.”

Gold was up 0.78% to $1,586.44/oz, while platinum was down 1.91% to $960.76. Brent crude dropped 4.63% to $56.44 a barrel, its lowest level since early October. 

At the same time the Dow was down 1.38% to 28,461.70 points. In Europe, the FTSE 100 lost 1.31%, France’s CAC 40 1.03% and Germany’s DAX 30 1.18%. Earlier, the Hong Kong’s Hang Seng fell 0.52%, while Japan’s Nikkei 225 bucked the trend, gaining 0.99%.

The JSE all share fell 0.9% to 56,079.5 points and the top 40 0.95%. Banks dropped 2.52% while gold miners gained 2.47%. The JSE all share lost 1.76% in January.

Embattled sugar producer Tongaat Hulett said on Friday that its revenue decreased by 1.5% to R8.085bn in the six months to end-September. The group said the JSE has approved its request for the suspension of its shares to be lifted on February 3.

Sasol’s share price dropped 6.76% to R239.17, after the company said on Friday that headline earnings per share (HEPS) are expected to decline by between 69% and 79% to between R4.79 and R7.11 in the six months to end-December 2019.

MC Mining said on Friday that its CEO David Brown has resigned after seven and a half years at the helm. The company’s CFO Brenda Berlin will take on Brown’s role in an acting capacity. Its share price gained 5.66% to R5.60.

mjoo@businesslive.co.za