Rand, stocks rally as stimulus, easing lockdowns lift sentiment

Rand firmed on Tuesday as risk sentiment globally improved, spurred by stimulus measures and talk by leaders around the world about easing lockdown measures.

At 1545 GMT the rand was 0.8% firmer at R18.63 per dollar from an opening level of R18.77, extending its recent rally to three sessions as investors were soothed by last week’s announcement of plans to ease some coronavirus lockdown restrictions in South Africa.

Countries from Italy to New Zealand and Brazil have in recent days announced the easing of coronavirus lockdowns, looking to follow in the footsteps of China which has already embarked on restarting its economy, but with mixed results.

“While global financial markets haven’t yet entered a period of sustained risk-on, financial markets tend to lead economic data, and the extreme levels of uncertainty in markets earlier this month and last month seem to have waned,” said chief economist at Investec Annabel Bishop. South African President Cyril Ramaphosa last Thursday announced a phased easing of lockdown restrictions set to begin on May 1, in addition to a R500 billion ($26 billion) stimulus package, giving some cheer to investors worried about the economy’s recovery prospects.

The rand’s gains, however, were curbed by lingering concerns about South Africa‘s credit rating after Moody’s on Friday warned about ballooning debt and the effectiveness of the stimulus. “Moody’s latest credit rating warning implies a credit rating downgrade will materialise,” Bishop said. “South Africa’s government bonds exit from the FTSE Russel WGBI at the end of April, that’s also weighing on market sentiment for the rand.”

Bonds firmed, with the yield on the 2030 bond down 17.5 basis points to 10.780%.

South African shares rose, helped by gains in retailers’ shares on the prospect that easing restrictions will see the return of shoppers to stores that have been empty for five weeks. The JSE Top 40 index climbed 1.11% to 46,100 points, while the broader All-share index was up 1% at 50,029 points.

The momentum was slowed by a fall in gold prices, reflected in a 8.8% slide in the bourse’s gold index, led by AngloGold Ashanti Ltd and Gold Fields Ltd, which were both down nearly 10%.

In response to the easing lockdown measures mining companies in South Africa are setting up shared quarantine facilities for miners testing positive for COVID-19 and are discussing other ways to cooperate.