SA’s financial markets in turmoil as rand weakens, JSE shares tumble

SOUTH Africa’s financial markets were in turmoil yesterday as the rand continued to weaken while stocks fell to their lowest in more than two months as investors fled to safer haves on the back of an uncertain economic climate.

The rand remained subdued almost unchanged at R19.81 against the US dollar by close of trading at the JSE after hitting a new all-time worst level of R19.86 on Tuesday on the back of the stronger US dollar, along with local political and electricity issues.

There have been growing concerns about South Africa’s relationship with Russia alongside domestic economic risks.

Investor sentiment in South Africa has soured over factors including a heightened power crisis and US allegations that the country supplied weapons to Russia last year.

Investors have also seen the gazetting of diplomatic immunity by the South African government for delegates who will attend the BRICS Summit later this year as a move to protect Russia’s President Vladimir Putin against possible arrest following the warrant issued by the International Criminal Court.

Concurrently, the South African Reserve Bank has issued a warning about the potential adverse effects on financial stability if secondary sanctions are imposed due to doubts surrounding South Africa’s perceived “neutral” position on the RussiaUkraine conflict.

At the same time, South Africa continues to grapple with prolonged and intense load shedding, which poses a significant risk to the country's economic outlook.

The local currency has weakened nearly 10% already this year as South Africa’s economy faces a number of economic and political headwinds while imported inflation is also eating at the value of the rand.

TreasuryONE currency strategist Andre Cilliers said the rand, along with other emerging markets currencies, was also being weakened by the stronger US dollar.

“Load shedding is back at stage 6, while the government has granted diplomatic immunity to Russian officials attending the BRICs summit in August. The ICC has put out a statement saying South Africa must arrest President Putin,” Cilliers said

“The rand will remain on the back foot over the next few months with negative investor sentiment, driven by possible economic sanctions, unlikely to improve.”

The JSE All Share index fell about 1.2% to close at an over two-month low of 75 067 points yesterday, the second straight session of drops, with global investors eyeing the progress of the US debt-ceiling deal.

At the same time, disappointing

Chinese factory data and hawkish comments from several US Federal Reserve officials weighed on market sentiment.

Retailers Spar Group fell 15.2% and Richemont declined 5.2%. They were the worst performers, followed by industrials and tech companies, Naspers and Prosus. For the month, the JSE lost about 4%.

Meanwhile, South Africa recorded a trade surplus of R3.5 billion in April, below market estimates of R4.95bn and a downwardly revised R6.3bn in March.

Exports tumbled 14.5% over a month earlier to R163bn, mainly on lower shipments of precious metals and stones; machinery and electronics; base metals and vegetable products.

Among trading partners, overseas sales decreased to Europe by 15.9%, Africa fell by 13.4%, Asia by 12%, and by 7.6% in America, but rose to Oceania by 2.5%.

Imports fell at a slower 13.5% to R160.3bn, amid sharp declines in purchases of mineral products; vehicles and transport equipment; wood pulp and paper; and chemical products.

Among trading partners, acquisitions were reduced from Asia, Africa, Europe and Oceania, but increased by 2.3% from America.