JOHANNESBURG – Imported goods are expected to shoot off the roof, and this ranges from finished goods consumers consume every day to technology. A weakened currency also leaves the economy vulnerable to a steep rise in inflation, which will force the Sarb’s hand to hike interest rates.
The next Reserve Bank meeting later this month may be the time that the Monetary Policy Committee decides to up the rate. Another downside to a weak currency is that it has the potential to tilt the scales to a higher net effect for the petrol price at the pumps.
Banking shares reel on the back of it:
Banking stocks took a hammering on the JSE on Wednesday on the news of a retreating rand. Nedbank saw its share price decline 5.01 percent to R255.04, while the country’s biggest bank by market capitalisation, FirstRand, shed 3.33 percent to R64.82. Standard Bank closed the session 3.06 percent weaker at R174, and Absa lost 1.93 percent to R154.
Emerging markets stocks rout:
Emerging market equities slumped almost across the board yesterday, led by sharp falls in the stock markets of Indonesia, South Africa and Hong Kong. Investors worry about the impact of rising interest rates and trade disputes.
The MSCI Emerging Markets index is down around 15 percent from its peak earlier this year. This translates to losses of close to R15 trillion since January. Capital Economics in a note said that correlations between stock markets in different EMs will remain high, or increase, as equity prices fall globally.
“We doubt that the main factors which have caused equities across much of the emerging world to weaken together recently will go away just yet,” Capital Economics said.
- BUSINESS REPORT