US and China’s tit-for-tat tariff war sees rand, JSE lose ground

The rand had fallen to R13.43 against the greenback by 5pm, 0.61 percent weaker than it was at the same time on Tuesday, while the Alsi retreated 1.37 percent to 57 231 points. 

The bluechip FTSE/JSE Top40 Index fell 1.45 percent to 51 045 points. 

The weakness in emerging currencies and markets was sparked by US President Donald Trump’s fresh wave of tariffs against $200 billion (R2.67 trillion) in Chinese goods. 

This sent jitters through Asian as equity markets awaited a retaliatory move from China. 

“The more to-ing and froing (of tariffs) we have, the more uncertain the markets will become and the more risk averse the market will be. This equates to a lot of potential volatility for the rand in the months to come should the trade war continue,” TreasuryOne senior currency dealer Andre Botha said. 

“We saw the rand spike on the news that the unions dismissed Eskom’s latest wage offer. It is the same case as the trade war: the longer the impasse, the greater the effect on, in this case, the local market.” 

China has yet to announce exactly how it will respond to the US tariffs. It could implement further tariffs on its imports from the US. 

China matched the duties imposed by the US last week on $34bn of goods. The trade war between the US and China and a widening trade deficit has led to additional volatility and a weakening in the rand in recent months. 

The Bureau of Economic Research last week said that in light of the gathering global risks and an apparent stalling in President Cyril Ramaphosa’s reforms, it had downscaled its forecast for the rand. 

The organisation forecast the rand to trade in a range of R13 to R14 against the dollar to the fourth quarter of next year, ending the period at about R13.40. The weakness in local equities was broad-based, with industrial stocks losing 1.28 percent. 

Losses among banking stocks were led by Absa Group, which shrunk 2 percent to R162. Resources closed the session 1.67 percent weaker, with Kumba shedding 0.79 percent to R319.21. 

Victor von Reiche, a portfolio manager at Citadel, said the JSE’s weakness followed Asian markets, with fears over the impact trade wars might have on global growth. 

“Our local market is heavily geared to China, in particular, with Naspers (Tencent), BHP Billiton, Richemont and Anglo American constituting 48 percent of the Top 40 Index, which is amplifying the negative price action,” Von Reiche said. 

Naspers closed the session down 1.6 percent to R3 440.