Cape Town - The rand strengthened for a second day as South Africa’s purchasing managers’ index unexpectedly rose to the highest in six years, signaling an expansion in manufacturing as growth in China boosts export prospects.
South Africa’s PMI climbed last month as a weaker rand made exports more attractive, Kagiso Tiso Holdings said in an e-mailed statement.
A similar gauge in China, the biggest buyer of South African raw materials, advanced to a 16-month high in August.
In the US, where markets are closed today, President Barack Obama delayed action against Syria by seeking approval from Congress.
“There is finally some sign that recovery in the rest of the world, and the promise implied by a weaker rand, are helping” exports, Razia Khan, the London-based head of Africa economic research at Standard Chartered Plc, said in an e-mail.
“It also suggests that the outlook for trade in the second half may not be as dismal as in the first.”
The rand appreciated as much as 1.2 percent, and traded 0.5 percent stronger at 10.2295 per dollar as of 4:20 p.m. in Johannesburg.
The currency has declined 3.5 percent since the beginning of August, reaching a 4 1/2 year low on August 28.
Yields on benchmark 10.5 percent bonds due December 2026 dropped two basis points, or 0.02 percentage point, to 8.44 percent.
South Africa’s PMI climbed to 56.5 in August from 52.2 in July.
The index has been above 50 for five months, indicating expansion in factory output.
The median estimate of four economists surveyed by Bloomberg was for a drop to 51.5.
China’s PMI was at 51.0, an official report showed yesterday.
The median estimate in a Bloomberg survey was 50.6.
A separate PMI released today by HSBC Holdings Plc and Markit Economics rose to 50.1 last month from 47.7 in July, the biggest gain in three years and the first reading above 50 since April.
China buys about 14 percent of South African exports, according to government data.
The rand “should start the week positively, helped by Chinese data and an easing of stress over Syria,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments before the South Africa PMI data was released.
“Once again the data indicates Chinese resilience and reduces the risks of a hard landing” that would damp South Africa’s export prospects, he said.
Foreign investors bought a net 2.51 billion rand ($245 million) of South African equities on August 30, bringing inflows for the month to 5.03 billion rand, according to JSE Ltd. data. - Bloomberg News