UPDATE 2-South Africa's rand slumps after GDP shocker, stocks up

  • Reuters
  • Forex News
UPDATE 2-South Africa's rand slumps after GDP shocker, stocks up
Credit: © Reuters.

* Q1 GDP down 3.2% on quarterly basis

* Central bank mandate news also weigh

* Stocks lifted by heavyweights (Updates prices, adds stocks)

JOHANNESBURG, June 4 (Reuters) - South Africa's rand slumped on Tuesday after data showed the worst quarterly economic contraction in a decade at the start of 2019, while stocks gained.

The rand was also hammered by news that South Africa's governing party has agreed to expand the central bank's mandate to include employment and growth as well as inflation. are nervous about any changes that could curb the independence of the South African Reserve Bank (SARB).

At 1530 GMT, the rand ZAR=D3 was 1.8% weaker at 14.7000 per dollar.

"The problem is that the economic data release has accelerated even the most pessimistic concerns regarding the health of the South African economy," said Jameel Ahmad, global head of currency strategy and market research at online trading platform FXTM.

The statistics office said gross domestic product contracted a quarterly 3.2% in the first three months of 2019, lagging the 1.7% decline economists had expected and showing President Cyril Ramaphosa's growth drive is struggling to gain traction.

Bonds also weakened, with the yield on the benchmark 10-year issue ZAR186= up 3 basis points to 8.45%.

In equities, stocks strengthened as the rand weakened on the poor GDP numbers.

The broader All-Share index .JALSH closed stronger 0.38% to 56,500 points, while the blue-chip Top-40 index .JTOPI increased 0.48% to 50,452 points.

Leading the blue chips was luxury brand Richemont CFRJ.J , which gained 5.57% to 112.74 rand, while mining company Gold Fields GFIJ.J climbed 5.010% to 71.46 rand on the back of a near three-month gold price peak. the downside, banking stocks took a hit slipping 3.83% to 94.45 rand. Standard Bank .SBKJ.J shed 4.21% to 193.97 rand, while Absa ABGJ.J fell 4.210% to 165.99 rand.

The weak GDP numbers weighed quite heavily on the banks, although the heavyweights were up, said Michele Sanpangelo, a portfolio manager at Independent Securities.

"It's definitely a tale of two sectors; ones that like the weak rand and ones that don't," Sanpangelo said.

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