Local markets falter as risk appetite wanes

South African assets weakened across the board on Tuesday, erasing gains from the previous session as appetite for riskier assets was muted by global concerns.

Worries over Italy’s budget, Brexit talks and Saudi Arabia’s handling of Jamal Khashoggi’s killing sapped investor confidence in emerging markets.

On Monday, South African assets were broadly firmer on the back of measures from Chinese authorities to boost the economy.

“Since then, renewed concerns regarding the Italian budget and geopolitical factors have seen the US dollar recover across the board, and the markets have sought traditional safe haven assets,” Nedbank analysts said in a note.

At 1456 GMT, the rand traded at 14.41 versus the dollar, 0.51% weaker on the day, compared to a close of 14.33 in New York.

Government bonds were slightly weaker, with the yield on the benchmark instrument due in 2026 up 0.5 basis points at 9.170%.

South Africa-focused investors will turn their attention to finance minister Tito Mboweni’s inaugural budget speech on Wednesday, when he is expected to unveil spending shifts to try to haul the economy out of recession.

“Markets will look to Treasury to provide clarification on expenditure overruns, debt-stabilisation methods, stimulus support in a weak growth environment and state-owned entities reform,” Rand Merchant Bank analysts said in a note.

In the equities market, the Johannesburg All-share index closed down 1.98% at 51,168 points, while the Top-40 index fell 2.23% to 45,007 points.

Market heavy-weight Naspers was responsible for much of the decline on the top-40 index, becoming the second biggest loser on the bourse.

It ended the session 4.59% weaker at R2 681, tracking declines of Chinese gaming and social media firm Tencent Holdings <0700.HK., in which it holds a 31% stake.

Food producers Tiger Brands and Pioneer Food fell 3.05% to R247.37 and 1.54% to 78.81 rand respectively after Morgan Stanley cut target prices on both stocks.