South African rand rallies on Moody's, stocks track Asia lower

JOHANNESBURG: A decision by Moody's to delay its review on South Africa's sovereign debt buoyed the rand to its strongest in a week as it rallied for the third straight session against the dollar on Monday.

Stocks followed Asian stocks lower over concerns that trade war tensions between the United States and China were starting to affect economic growth in the world's second biggest economy.

The rand was 1.0 percent stronger at 14.3750 per dollar at 1600 GMT, adding to its early session gains to cross the 14.4400 resistance level after retail figures in the United States undershot expectations, sending the greenback weaker.

Traders said the decision by Moody's to postpone publishing a review of the country's debt from Friday had given the rand a push. Moody's did not announce a new date for releasing its rating on Africa's most industrialised economy.

While most analysts saw little risk of a downgrade by Moody's, the last of the top three ratings firms to rank Pretoria's debt investment grade, the possibility of a change to the outlook had prompted some bearish positioning.

"The dollar has fallen away and under pressure amid inflationary concerns. Moody's delay in giving decision on our sovereign debt staved off risk-off sentiment and rather prompted risk sentiment," said Afrifocus Securities portfolio manager Cheslyn Francis.

Government bonds were also firmer, with the yield on the benchmark paper due in 2026 down 2.5 basis points to 9.22 percent.

On the bourse, the Top-40 index fell 2.07 percent to 46,295 points, while the broader All-Share index was 1.88 percent weaker at 52,467 points as Asian stocks slid.

Data released on Friday showed Chinese auto sales posted the biggest drop in seven years.

"Until there is some policy certainty around the trade war, this volatility will continue," said Ryan Woods, equities trader at Independent Securities.

Both major equity indices moved into oversold territory, according to momentum indicators tracked by analysts, suggesting they could be in for a technical rebound soon.

South African bourse heavyweight Naspers dragged the Top-40 index lower, falling 5.43 percent to 2,750 rand, as Hong Kong's Tencent Holdings, in which Naspers has a 31.2 percent shareholding, closed 1.94 percent lower.

Fast-food chain owner Famous Brands Ltd slumped 8.63 percent to 93.20 rand as the company booked an impairment charge of 874 million rand ($61 million)before tax on its struggling UK Gourmet Burger Kitchen business.