Banking stocks sink to two-week low as global markets in a risk-off mode
CAPE TOWN – The South African banking stocks sank 2.6 percent to a two-week low the index declines for a fourth day, amid weakness in most emerging-market currencies and as investors assess the potential impact of a strike by bank workers planned for Friday.
Michele Santangelo, a money manager at Independent Securities said global markets did seem to be in a risk-off mode at the moment and hence emerging-market banks were particularly vulnerable.
“The weakness in the rand is also weighing on sentiment towards the banking sector and that, coupled with the upcoming strike in the banking sector is leading to greater selling pressure on the banks,” Bloomberg quoted Santangelo as saying.
The domestic currency weakened 1.1 percent vs dollar to three-week low during intraday trade. At 5pm the rand was bid 17 cents lower at R15.01 to the dollar, 13c lower against the euro at R18.58 and 13c weaker against the pound R16.44, compared with Monday’s 5pm bid.
The looming banking strike in the local market is, however, having a minimal impact, if any, on the domestic currency.
Treasury partner at Peregrine Treasury Solutions Bianca Botes said if one considered the euro vs dollar move, coupled with the rally in gold prices, the rand weakening was largely being driven by global risk-off sentiment.
“A spike in the gold price correlated with the erosion of risk appetite and a broader emerging market selloff has seen the rand weakening by over 1 percent, to trade at R15.03 a dollar,” said Botes.
She said the announcement that the House of Representatives would launch a formal impeachment inquiry against US President Donald Trump was also eroding global market sentiment.
However, impeachment has hung over Trump his entire term, and to date he has survived the storm. “The true test will lie in who his proposed successor will be, as well as the policies that the ruling party will adopt and what that will mean for global trade,” she said.
Botes also noted that the uncertainty in the UK, where Boris Johnson is being called upon to step down, was adding fuel to the fire following the court ruling that the suspension of parliament was unlawful.