UPDATE 1-South Africa's rand falls, stocks lifted by Massmart bounce

  • Reuters
  • Forex News
UPDATE 1-South Africa's rand falls, stocks lifted by Massmart bounce
Credit: © Reuters.

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JOHANNESBURG, Jan 30 (Reuters) - South Africa's rand weakened by more than 1% on Thursday, as dampened risk sentiment over the coronavirus outbreak in China added to worries about the local economy after state power firm Eskom announced the resumption of rolling blackouts.

At 1600 GMT the rand ZAR=D3 was 1.15% weaker at 14.7920 per dollar, bringing losses for the month to nearly 5% and making it the third worst-performing currency globally as the breathing room it gained in late-2019 evaporated.

The rand is typically sensitive to swings in risk sentiment and has been punished more than similar commodity-linked currencies by fears that the coronavirus outbreak in China will hurt economic growth in the world's top resource consumer.

Its slide was accelerated by news that state power firm Eskom would resume nationwide electricity cuts, rattling already shaky investor sentiment leading up to the Feb. 26 budget in which the treasury is set to announce a lower growth outlook. International Monetary Fund said on Thursday it sees growth in South Africa at 0.8% in 2020, a touch lower than the local central bank's forecast of 1.2%. The IMF cited bailouts to state firms as the main drag on growth. also weakened, with the yield on the benchmark 2026 government issue ZAR186= adding 1.5 basis points to 8.04%.

In the equities market, stocks gained, with Massmart Holdings MSMJ.J among the top gainers as the retailer unveiled a turnaround plan spearheaded by its new chief executive, Mitch Slape.

Massmart, majority-owned by Walmart (NYSE: WMT ) WMT.N , said it will reorganise four of its businesses into two divisions, review its store portfolio, streamline certain support structures and phase out categories that are performing poorly such as fresh and frozen in its Game stores. Wealth and Investment Portfolio Manager Wayne McCurrie said the market cheered the new CEO's cost-cutting strategy, saying it showed he is willing to save the struggling retailer, which also forecast a loss for the full-year.

"Cutting cost and all the other initiatives they have planned, they think they can more than double the current margin they achieved, so the market likes it and that's why the shares are up," said FNB Wealth and Investment Portfolio Manager Wayne McCurrie.

Shares in Massmart closed 6.44% firmer at 53.75 rand.

Gold stocks .JGLDX also helped the bourse higher as bullion prices held on to gains, supported by concerns over the potential impact on global economic growth of the coronavirus outbreak in China, which has killed 170 people. GOL/

Gold Fields GFIJ.J rose 7.16%, Harmony Gold HARJ.J gained 4.38% while DRD Gold DRDJ.J firmed 4.30%.

The Johannesburg All-Share index .JALSH closed 0.39% firmer to 56,590 points, while the Top-40 index .JTOPI climbed 0.42% to 50,552 points.

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