South African stocks opened the week on a stronger footing over optimism about this week’s credit rating reviews, but the rand weakened on the back of a firmer US dollar.
Investors are hopeful about the review of South Africa’s sovereign credit ratings by S&P Global and Moody’s agencies on Friday, after last month’s improved fiscal outlook.
The JSE All Share Index surged to 73 258 points yesterday, its highest in seven months buoyed by retail and commodities-linked stocks, before declining below the 73 000 mark later in the afternoon.
The market is expecting retail sales to grow on annual terms for the third month in September, as consumers return to shopping.
Telecommunications groups Telkom and Vodacom led the losses with 6.3% and 6%, respectively.
Vodacom had posted an operating profit of R13.27 billion in the first half, down from R14.06bn and headline earnings per share fell 9.5% mainly due to losses in Ethiopia and higher finance costs.
Gold and Brent crude prices also fell as record high coronavirus cases in major Chinese cities dashed hopes of the reopening of the economy of the world’s biggest crude importer.
Meanwhile, the rand weakened to R17.37 against the greenback during intra-day trade after recovering vast tracks of lost territory over the past two days.
The rand ran very hard over the past week after inflation slowed to 7.7% in the US, strengthening by more than R1 to the dollar, and analysts expect some consolidation and a possible retracement in the short term.
There is now an active search a foot for good news on inflation, and growing calls for the Fed to slow the pace of interest rate hikes.
The markets will also be closely watching the upcoming meeting between US President Joe Biden and President Xi Jinping at the G-20 Summit in Indonesia.
Nedbank senior economist Nicky Weimar said the rand should end this year around current levels.
Weimar said the risk to the near-term outlook remained tilted to the downside, with another US Federal Reserve policy meeting in December, and the ANC set to elect its leader in the same month.
“Next year the threat of a global recession is set to weigh on all emerging markets economies currencies, resulting in bouts of weakness,” she said.
“Despite this, we expect the rand to strengthen moderately over the second half of 2023, as risk appetites return in anticipation of lower US interest rates, and the passing of the worst of the global downturn,” Weimar said.