Rand rallies as Moody’s seen holding fire, stocks rebound

The rand continued to rally on Friday, lifted by a deep Wall Street selloff and near unanimous bets that Moody’s will keep the country’s credit rating at investment grade.

Stocks snapped a four-day losing streak to end the week positive, led by market heavyweight Naspers.

At 1530 GMT the rand was 1.25% firmer at 14.45 per dollar, posting a fresh one-week best as emerging markets overall benefited from a revival in risk appetite after the two-day slide on Wall Street.

Markets are also widely expecting Moody’s to keep Pretoria’s foreign currency rating unchanged and are awaiting the mid-term budget (MTBPS) to be delivered by new finance minister Tito Mboweni on October 24.

“Although it feels odd that Moody’s would announce the review such a short time before the MTBPS, it may also reflect the appreciation that it is a communication tool that will not hold any substantive changes,” analysts at Investec said.

In March Moody’s affirmed South Africa’s investment-grade credit rating and revised its outlook to stable from negative. Last month the agency said there was little chance it would cut the country to ‘junk’ this year.

Bonds were also firmer, with the yield on the benchmark government bond due in 2026 down 2 basis points to 9.245%.

In the equities market, the All-Share index was 2.38% firmer at 53,473 points while the blue chip Top 40 Index climbed 2.65% to 47 273 points.

Global markets recovered on Friday after the aggressive sell-off led by Wall Street.

Naspers led the Top 40 Index, rising 8.46% to R2 908. Hong Kong’s Tencent Holdings, in which Naspers has a 31.2% shareholding, closed 8% higher. Banks rose 3.32%.

On the technical front, Thursday’s sell-off drove the local market deep into oversold territory.

“A majority of the bounce is on Naspers. Some key technical levels have been broken and we’re not sure how it will play out,” said Vasili Girasis, equities trader at BP Bernstein. “My feeling is that the volatility is here to stay for at least the next few weeks.”

South Africa’s biggest food producer Tiger Brands said on Friday it had re-opened a facility that was closed after it was implicated in the world’s largest outbreak of listeria which killed more that 200 people.

Shares in the food producer closed 3.96% higher.