JOHANNESBURG: South Africa’s rand weakened more than 2 percent on Thursday and bonds fell after the current account deficit widened in the third quarter and power firm Eskom said it was considering restructuring its debt, dimming investor appetite for the currency.
Stocks touched six-week lows, tracking world markets which slumped on revived fears of a flare-up in US-China tensions following the arrest of a top executive of Chinese tech giant Huawei.
The rand was trading at 14.1825 per dollar by 1620 GMT, 2.4 percent weaker. It earlier reached a session-worst 14.2050 after closing at 13.8500 overnight.
Sentiment towards the currency was initially hit by general risk off trade that weighed down most emerging currencies as worries about the impact of the US-China trade war on global growth continued to ripple through markets.
Data showing the current account deficit widened to 3.5 percent of gross domestic product in the third quarter, and a warning by Eskom that it may restructure its debt quickened the rand’s slide to its weakest since Nov. 16.
“The current account figure has added momentum to the rand’s slide from earlier in the session. The figures talk to the vulnerability faced by South Africa to portfolio outflows, especially in a environment where the Fed is tightening and there are worries about Eskom,” said ETM Analytics Halen Bothma.
“It was looking likely that a little bit of pressure was going to start coming through especially as the Eskom headlines have hit the market, especially the implications for the sovereign rating,” Bothma added.
Ratings firm Fitch on Thursday kept South Africa sub-investment grade credit rating steady at subinvestment and maintained its stable outlook, but warned that low growth and the rising debt of state-owned firms posed a risk.
Government bonds were also weaker, with the yield on the benchmark bond due in 2026 rising 9 basis points to 9.065 percent.
In equities, the All Share index was 1.75 percent lower at 50,806 points. The blue-chip Top 40 index was down 1.9 percent at 44,778 points.
Embattled retailer Steinhoff slumped 10 percent to 1.60 rand after it reported that it delayed publishing its 2017 and 2018 financial statements, citing delays to a forensic investigation.
Group Five plunged to a 26 percent to 25 cents after its client in demanded $60.5 million compensation relating to the unfinished Kpone power plant in Ghana.