S.Africa stocks fall over 3pc, rand also tumbles

JOHANNESBURG: South African benchmark stocks booked their biggest daily decline in more than 15 months on Thursday, tracking equity losses elsewhere on resurgent worries about the global economy which also hit the rand.

Government bonds however triumphed and the yield on the 4-year issue fell as much as 12 basis points to a new all-time low of 6.67 percent as foreign investors continued to snap up local debt, attracted by yields which compare favourably with those in developed countries.

The yield on the longer-dated 2026 bond was at 7.995 percent, down 15.5 basis points from Wednesday's close.

The JSE Top-40 blue-chip index fell 3.37 percent to 26,030.31, suffering its biggest daily decline since May last year. The broader All-share index surrendered 2.95 percent to 29,288.86.

"Two things drove the market today: global growth concerns and funding problems in Europe," said Ian Louw, a trader at Vunani Securities.

Renewed worries about Europe's debt crisis and a raft of weak US economic data hit global markets on Thursday, driving down stocks and oil prices and pushing US bond yields to record lows while pushing gold to a record high.

Dimmer prospects for global growth are creating an uncertain environment for the local economy, Finance Minister Pravin Gordhan said on Thursday.

Bidvest was among the worst performers on South Africa's blue-chip index after the industrial conglomerate turned down takeover bids for its foods-service unit.

Bidvest fell 5.16 percent to 147 rand.

Platinum miner Northam , hit by a 50 percent decline in earnings, dropped 2.3 percent to 34 rand and Grindrod slumped 3.41 percent to 13.33 rand after the shipping firm said first-half profit nearly halved.

GOLD MINERS BUCK DOWNWARD TREND

Gold miners bucked the trend as the price of the yellow metal rallied to its second record in a week. Harmony was up 0.60 percent at 91.65 rand and Gold Fields gained 0.17 percent to 327.05 rand.

The rand traded at 7.2250 by 1624 GMT after earlier hitting a session low of 7.2505, down more than 2.1 percent from Wednesday's close at 7.0927. The rand ranked in the bottom five in a basket of 20 emerging market currencies monitored by Reuters.

"We have seen a massive move on the global equities side, and, despite the fact that we have not seen any sign of capitulation on the fixed-income side yet, I think that the equities outflow is once again taking its toll on FX," said Luis Costa, head of CEEMEA forex and debt strategy at Citi in London.

Because South Africa's bourse is liquid, with heavy penetration from international accounts, this makes it vulnerable to global moves, also affecting the rand, analysts said.

"I think equities now are definitely the centre of the hurricane here. For the moment the dynamics in global equities ... look pretty horrible and there could be more losses on the rand from equity contagion," Citi's Costa said.

Data from the JSE securities exchange showed foreign investors have sold off a net 5.6 billion rand ($777.1 million) worth of equities in the last 10 days but bought 4.1 billion rand of bonds.

Signs that South Africa's economy is slowing have increased appetite for bonds, pushing yields lower as investors bet that the Reserve Bank is now unlikely to raise interest rates this year.

Copyright Reuters, 2011