South Africa’s rand retreats from three month high, stocks fall

South Africa’s rand fell on Friday, giving back some of Thursday’s gains after a hike in the official borrowing rate by the central bank helped the currency hit a three-month high.

Stocks fell led by bourse heavyweight Naspers coming under pressure.

At 1503 GMT, the rand was 0.87% weaker at R13.8800 per dollar, easing along with other emerging market currencies as investors worried about Sino-US trade tensions ahead of a high-stakes meeting between the leaders of the two countries next week.

The rand advanced more than 1% to R13.7150 on Thursday, its best since Aug. 10, after the South African Reserve Bank (SARB) raised rates by 25 basis points to 6.75%.

South African-focused investors were awaiting for the release of the S&P Global Ratings sovereign credit rating review later on Friday.

S&P rates South Africa’s foreign currency debt ‘BB’ and its local currency debt ‘BB+’, having downgraded the country to below investment-grade last year following a deterioration in the economic outlook and public finances.

“The rating agency will most likely emphasise the continued poor economic growth and deterioration in the budget deficit projections, as well as the large and still growing fiscal debt burden, interest costs and contingent liabilities,” said analysts from RMB in a note.

A senior S&P analyst said on Oct. 30 that South Africa’s sovereign rating risked being downgraded due to concerns about the postponement of fiscal consolidation and lack of clarity around land expropriation.

In fixed income, the yield on the benchmark 2026 government bond fell 0.5 basis points to 8.935%, extending Thursday’s rally.

In equities, the All Share index fell 0.96% to 50,698 points while the Top 40 index was 1.02% lower at 44,536 points.

Naspers, which owns around a third of Hong Kong listed Tencent, closed down 1.33% to R2,694.07 after weakness in the Chinese technology giant’s shares.

“Around the world tech stocks are out of favour at the moment,” said Greg Davies, equities trader at Cratos Capital.

Among the losers on the bourse were banking shares which were down 1.12, with Nedbank 1.95% softer at R250.53  and FirstRand 1.07% lower at R66.87.

Private healthcare provider Life Healthcare, was among the gainers on the bourse, closing up 7.62% to R26.42 after it reported a jump in full-year earnings.