Rand slides on risk aversion, stocks down

The rand fell on Friday, in line with other emerging market currencies, as investor appetite for riskier assets dimmed amid fresh worries of a sharp economic slowdown in China.

Stocks ended the week lower, with Aspen Pharmacare leading the decliners.

At 1512 GMT, the rand was 2% weaker at 14.45 per dollar from a close of 14.17 on Thursday. The currency hit a session low of 14.47.

The dollar gained as weak economic data in China encouraged investors into the perceived safety of the US currency and as the euro and pound came under pressure, the latter because of renewed concerns about Britain’s withdrawal from the European Union.

The greenback added gains after solid US store sales in November reduced some concerns about a sharp slowdown in the world’s largest economy.

“The markets have traded with little if any conviction over the recent sessions. Locally, numerous factors are weighing on the rand, together with the threat of trade wars and a standoff between Europe and the UK,” Nedbank said in a note.

“As a result, markets are likely to continue trading cautiously into year-end.”

Sentiment towards the rand has in recent weeks been hit by financial woes at state-run power utility Eskom, which is scrambling to keep the lights on and has been implementing controlled power cuts to prevent the grid from collapsing.

Ratings agency Moody’s said on Friday Eskom’s request for government to take up 100 billion rand of its debt could cause the country’s overall debt ratio to jump two%age points from the current 55.8%.

In fixed income, the yield on the benchmark 2026 paper jumped 6.5 basis points to 9.205%.

On the bourse, the Johannesburg all-share index closed 0.6% lower at 51 428 points, while the top-40 index weakened 0.5% to 45,406 points.

Aspen fell to a 6-1/2 year low, a day after the South African drugmaker said it had negotiated a temporary relaxation of its lending agreements and forecast little growth in full-year revenues.

“The market is spooked by the fact that the debt ratio is not coming down quick enough and realising that it may have to sell more business in the future in order to cover its debt especially when it is growing at such levels,” said Greg Katzenellenbogen, director at Sanlam Private Wealth.

Aspen shares edged 8.57% lower to R129.50.