South Africa's rand on the ropes, stocks weaker
JOHANNESBURG: South African assets weakened on Thursday as a rally in U.S. bond yields overshadowed President Cyril Ramaphosa's promise to create an additional quarter of a million jobs year.
At 1500 GMT the rand was 0.51 percent weaker at 14.7200 per dollar, a fresh three-week low and its fifth successive day of losses, as investors looked beyond emerging markets and chased rising returns after the big jump in U.S. yields.
Local bonds took a beating, with the yield on the benchmark paper due in 2026 rising 11 basis points to 9.2 percent, its highest since Sept. 18. Stocks fell, extending their losses to a third day after a volatile session, led by financial issues.
Ramaphosa announced a package of reforms on Thursday which he said would create 275,000 more jobs a year.
But emerging market assets fell across the board as a surge in U.S. bond yields dimmed the attraction of high-yielding currencies and stocks.
Traders were also looking ahead to U.S. employment data on Friday which is expected to bolster the case that the economy is booming, before deciding whether to close out rand positions.
"Should the data disappoint, expect the dollar to give back some lost ground and the local unit to recover. However in the short term it is looking more likely the rand will track a little weaker before it recovers," said analysts at Investec.
The World Bank on Wednesday cut its 2018 economic growth forecast for South Africa to 1 percent from an earlier 1.4 percent. The global lender also poured cold water on the growth impact of Ramaphosa's stimulus plan.
On the bourse, the blue chip top 40 index was 0.17 percent softer at 48,908 points. The all share index fell 0.26 percent to 55,030 points.
Financials were down 0.48 percent. Market heavyweight Naspers was down 1.55 percent at 2,924 rand, as Hong Kong-based Tencent Holdings in which it has a 31 percent stake, closed 2.41 percent lower.
"The stronger U.S. yields are making emerging markets less attractive and our financials are where most of the selling is happening," said Greg Davies, equities trader at Cratos Capital.
Shares in Pioneer Food Group slumped 10.65 percent after the company cited worries about a challenging market conditions in its full year results forecast.
"They spoke of weaker consumer and oil price increases which do not appear to be getting better. It is a challenging time for retailers," said Davies.
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