Downbeat Moody's, Naspers add to perfect storm for rand

The rand headed for its biggest drop against the dollar since 2016, buffeted by headwinds, including a downbeat assessment of the economy by Moody’s Investors Service and a plunge in the biggest company on the Johannesburg Stock Exchange.

The currency sank as much as 3.4% against the dollar after Moody’s said the pace of South Africa’s fiscal consolidation will be slower than government forecasts due to weaker-than-expected economic growth and a rising public sector wage bill. The statement came shortly after Reserve Bank Governor Lesetja Kganyago said growth projections were “worrying” and hinted policy makers aren’t about to raise rates.

A drop in commodity prices and concerns about the government’s plan to seize land for redistribution also weighed on the rand at a time when Turkey’s woes are damping investor demand for emerging-market assets.

“It’s a combination of factors,” said Warrick Butler, a currency trader at Standard Bank Group. “Take your pick.”

Naspers [JSE:NPN], which accounts for 18% of the benchmark stock index, tumbled after Tencent Holdings, in which it owns a 31% stake, missed earnings estimates. That raised concerns about outflows from the stock market. The benchmark index of equities fell the most since May.

The rand was 2.88% weaker at R14.65/$ by 17:22, bringing its decline this month to 9.7%. Yields on benchmark 2026 government bonds climbed 10 basis points to 9.04 %.

“Factors that have harmed the currency today includes news from Turkey, which points to a deepening of the crisis there, despite the lira’s bounce back today,” said Andre Cilliers, a trader at TreasuryONE. On the domestic front, a statement by the ruling African National Congress on land expropriation “put property rights back in focus and all the uncertainty that comes with it,” he said.

South Africa must amend its constitution to limit land ownership to 12 000 hectares per farm owner and white farmers who own more than that should cede the rest to the state without compensation, News24 said, citing ANC Chairperson Gwede Mantashe.

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