Johannesburg - South Africa's rand continued to rally on Thursday as the Bank of England's (BoE) decision to keep interest rates on hold meant more liquidity in the global system, especially for emerging markets that have to fund wide current account deficits.
Stocks were weaker as low crude prices weighed on two of the bourse's heavyweights and retailer Massmart posted slower than expected sales growth.
Despite assurances from Finance Minister Pravin Gordhan that the country is not heading for a recession, the rand remained weak and only reversed losses after investors received encouragement from the BoE's decision to hold rates in its first policy meeting of the year.
“From a risk sentiment perspective, in investors minds that's one central bank less that's likely to hike and take liquidity out of the system,” ETM Analytics market analyst Ricardo Da Camara said.
“It's not a rand to the dollar-specific move but it's speaking more broadly to risk sentiment.”
As central banks from advanced economies move away from the era of historically low interest rates, emerging markets that have to fund wide current account deficits are expected to be the hardest hit as the supply of liquidity tightens globally.
At 1549 GMT the rand was trading at 16.41 to the dollar, up 1 percent from Wednesday's close at 16.5800.
In fixed income, government bonds tracked the rand higher, with the benchmark government instrument due in 2026 yielding 2.5 basis points less at 9.635 percent.
On the bourse, petrochemicals company Sasol was hit by weak crude prices and its shares slid 3.65 percent to R381.50. Mobile operator MTN, which relies on oil-rich Nigeria for most of its sales, was the biggest loser among the blue-chips, falling 3.94 percent to R121.1.
Shares in Massmart dropped 4.49 percent to R93.50 after posting a weaker than expected sales update.
“Massmart sales growth slowed down a lot due to consumers being under pressure,” retail analyst Syd Vianello said.
The benchmark JSE Top-40 index fell to its lowest level since August, shedding 1.57 percent to 42 741.46 points, with only four of the JSE's blue-chips closing in the black. The broader all-share index was down 1.48 percent at 47 697.53.
Trade on the bourse was lively with 270 million shares changing hands, well above last year's daily average of 223 million shares.
REUTERS