South Africa's rand rallies to near 18-month peak, stocks rise

JOHANNESBURG: South Africa's rand raced to its strongest in nearly 18 months on Friday, extending gains after the central bank said on Thursday it was ready to tighten monetary policy should a recent rise in consumer prices persist.

By 1500 GMT, the rand was 0.21% firmer at 13.9400 against the dollar, trading at its strongest levels since late December 2019.

The South African Reserve Bank (SARB) left its repo rate unchanged at 3.5% in a unanimous decision on Thursday, saying the current lending rate was supportive of the economic recovery. It also said it was ready to act if the recent jump in inflation persisted.

"The rand has responded positively to the SARB policy update. The strong gains likely reflected in part a reversal of (Wednesday's) losses following the more hawkish-than-expected FOMC minutes," said analysts at London-based MUFG.

"The combination of higher domestic yields and falling FX volatility is making the rand more attractive as a carry currency."

Investors' focus was also on an S&P Global Ratings credit rating review after the local market closes. The agency currently rates South Africa's long-term foreign-currency at BB-, three notches below investment grade, and local currency debt at BB, both with a stable outlook.

In the equities market, stocks ended the day firmer as Swiss luxury goods maker Richemont jumped after its results, offseting a slide in property and technology stocks.

The Johannesburg-listed shares of Cartier maker Richemont rose 4.76% to a record high as its net profit rose by a third in 2020/21, helped by a strong performance of its jewellery brands and a proposal to double its dividend.

Another notable gainer was insurer Old Mutual, up 2.28% after it said its measure of operating profit was up 48% in the three months to March 31, at 1.8 billion rand. .

Further gains on the main index were capped by weak property stocks as Fortress REIT Ltd shares fell 4.87% after it withdrew its previous dividend guidance. Arrowhead Properties fell 2.62% after flagging a 24% drop in half-year distributable income per B share.

Meanwhile technology investor Prosus NV and market heavy-weight parent Naspers were down 2.31% and 0.83%, respectively, mirroring a decline in Chinese gaming and social media giant Tencent Holdings Ltd, in which Prosus holds a stake.

Overall, the Johannesburg All-Share index closed 0.17% firmer, while the Top-40 index climbed 0.24%.

Bonds firmed, with the yield in the benchmark 2030 paper down 6 basis points to 8.99%.