Rand, stocks recover after sinking on Omicron worries

South Africa’s rand firmed early on Monday, recovering from last week’s plunge to its lowest since October 2020 on concerns around the discovery of a Covid-19 variant in the country that has been described as the most concerning.

Stock markets also recovered, after hospitality shares fell sharply on the news a host of countries would bar travel from southern Africa, hitting hopes of a bumper season for a tourism industry hurt badly by the pandemic.

At 0830 GMT, the rand traded at R16.12 against the dollar, 1% firmer than its close on Friday, when it sank to R16.36.

Global authorities reacted with alarm on Friday to the new variant, Omicron, which was detected in South Africa, with the EU and Britain among those tightening border controls as scientists sought to find out if the mutation was vaccine-resistant.

With little still known about the new coronavirus strain, market participants remained cautious.

“While the initial knee-jerk of the variant seems to be over, we still see some vulnerability in the EM market, with the stronger dollar posing a risk,” Andre Cilliers, currency strategist at TreasuryONE, said in a note.

“It will also be a boon to the local market as the President (Cyril Ramaphosa) did not announce any new lockdown measures in his address last night,” he said.

Opting not to impose further coronavirus curbs, Ramaphosa said on Sunday that authorities were considering making Covid-19 shots compulsory for certain places and activities, as a rise in infections linked to a new variant threatened to become a fourth wave.

The Johannesburg Stock Exchange’s All-Share Index was over 1% higher, with investors welcoming the news that domestic tourism remained unaffected for now. The blue-chip Top-40 was also up 1%.

Hoteliers City Lodge, Sun International, which also owns the country’s biggest casino chain, and Tsogo Sun Hotels were up over 5%, 3.6% and 2.41% respectively after crashing on Friday.

Government bonds also recovered, with the yield on the benchmark 2030 maturity down 5.5 basis points to 9.845%. The yield hit 10% on Friday, its highest since early May 2020.