Rand caps dramatic week at six-month low, stocks weak

The rand plummeted this week to reach the year’s lows, dragged down by weak economic growth and global investors shying away from riskier assets.

At 14.21 on Friday, the rand was 13.10 to the dollar, down from the year’s peak of 13.28 earlier in the session.

The currency was at its weakest level against the dollar since Dec. 18, Thomson Reuters data showed, extending losses suffered in the previous session.

South Africa’s economy shrank by 2.2% in the first quarter of 2018, with the most significant falls in the agriculture, manufacturing and mining, Statistics South Africa said.

Analysts at NKC African Economics cut their forecast for full-year real economic growth to 1.5% from 1.9% after the first-quarter data came out.

“Q1’s disappointing growth outcome signalled that the South African economy has lost momentum,” the analysts wrote to clients.

Risk appetite among investors eroded on bets that Europe’s massive monetary stimulus is nearing an end, compounded by uncertainty over trade relations before a meeting of G7 leaders .

NKC said the rand’s performance also reflected “waning Ramaphoria”, referring to optimism around the election of President Cyril Ramaphosa in February.

After Jacob Zuma was forced out as leader by the ruling party in February, Ramaphosa pledged to clean up governance, deal with high unemployment and improve basic services, igniting a wave of optimism.

But the recent poor economic data has eroded some of the enthusiasm in Africa’s most industrialised economy.

The yield for the benchmark 2026 government bond rose 1.4 basis points to 8.970%.

In the equities market, the benchmark Top-40 equities index lost 0.3% to 51 881 points. The wider All-share index fell 0.29% to 58 223 points, dragged by Naspers.

Market heavyweight internet and entertainment group Naspers lost 2.40% to R3 339 following a sharp fall in Hong Kong Tencent, in which it hold a 31% stake.

Bidvest, seen as a barometer for the South African economy, lost the most earlier on the benchmark index, falling nearly 3%. It pared losses to close down 0.02 to R202.75..

Shortly after the market closed on Thursday, the industrial group said trading profit was growing at a slower pace than reported in December.

Commodity stocks gained, however, benefiting from higher metal prices.

The gold index climbed 1.36%. Platinum producer Lonmin rose 5.81% to R8.20. (Reporting by