South Africa

Rand falls as Moody's cuts growth forecast, stocks firm

JOHANNESBURG - The rand weakened on Monday, as ratings agency Moody’s cut its forecast for the country’s economic growth due to lacklustre private sector demand at home and power cuts.

As of 1510 GMT, the rand was 0.4% weaker at 15.00 against the dollar.

Moody’s cut its 2020 GDP growth forecast to 0.7% from a forecast of 1.5% set in September, due in part to the detrimental impact of widespread power outages on manufacturing and mining activity.

Moody’s is the last of the major international agencies to keep an investment-grade rating on the sovereign and is scheduled to review that assessment in March.

South African President Ramaphosa acknowledged in his annual address to parliament on Thursday that growth had stalled, promising to fix its strained public finances and procure more renewable energy to address a power crisis.

Investors await Finance Minister Tito Mboweni’s 2020 budget presentation next week.

“All eyes will be on Tito Mboweni speech which will be closely scrutinised for further details on how the government plans to jumpstart the South African economy,” said Lukman Otunuga, senior research analyst at FXTM.

“The budget speech will be a major risk event that may influence whether South Africa can save or lose its last investment-grade credit rating,” Otunuga added.

On the bourse, stocks were lifted by a positive earnings report from Anglo American Platinum (Amplats) and Friday’s trading statement from Sibanye-Stillwater.

Amplats, which also has operations in Zimbabwe, jumped 5.4% to R1,329.99 after it said higher metal prices had driven its annual headline earnings per share - the main profit measure used in South Africa - nearly 2-1/2 times higher at R70.87, versus R28.93 a year earlier.

Sibanye continued to surge after saying on Friday it expects to swing to a 433 million rand profit in the year ended December, versus a 2.5 billion rand loss in 2018, due to significantly higher platinum group metals and gold prices and the inclusion of Lonmin’s Marikana operations.

Shares in the miner surged to a 3-1/2-year high, closing 5.89% firmer at R44.58. Amplats and Sibanye topped the Johannesburg All-Share index as well as the Top-40 index.

The Johannesburg All-Share index ended the day 0.56% firmer at 58,187 points, while the Top-40 index climbed 0.59% to 52,357 points.

Government debt weakened, with the yield on the benchmark bond due in 2030 adding 5 basis points to 8.9%.