JOHANNESBURG: South Africa's rand stretched gains on Monday, still riding the wave of last week's peaceful local government elections and further signs of a delay to interest rate hikes in the United States. Stocks ended slightly higher, with Steinhoff in focus after the retailer announced a surprise $3.8 billion acquisition of a US beds retailer.
By 1530 GMT the rand had gained 0.44 percent to 13.6400 per dollar, stretching a rally to its firmest level in nine months to a third consecutive session. Volumes were low in the session, with local markets due to close for a national holiday on Tuesday, helping the unit hold to the previous week's gains. Traders expect the rand to hold on to the gains with sentiment towards high risk emerging markets still favourable in a low yield environment.
"The bias is still for some gains as the global search for yield continues," trader at Rand Merchant Bank Isaah Mhlanga said in a note.
"Remember that USD/ZAR's fair value is between 11.50 and 12.50 according to our models, thus the continued strength of the unit is not inconceivable." Government bonds were also firmer, with the benchmark paper due 2026 cutting 4.5 basis points to 8.545 percent.
On the bourse the blue-chip JSE Top-40 index was up 0.28 percent at 45,510 and the broader All-share index added 0.26 percent to 52,486. Steinhoff, which is also listed in Frankfurt, said it will pay $64 per share to take Mattress Firm, more than double the US biggest bedding retailer's Friday close. Shares in Steinhoff ended 0.91 percent higher at 89.05 rand.
"While this seems an excessive price, and it is, the Mattress Firm's stock is trading today at the same price as in January 2012," said Sasha Naryshkine, a fund manager at Vestact in Johannesburg, which own shares in Steinhoff.
Overall, investors took their cue from an upbeat tone in major overseas markets after US jobs data bolstered expectation of faster growth in the world's biggest economy.
Trading volumes were low with about 146 million shares changing hands, or about half of last year's average trading daily volumes, ahead of a public holiday on Tuesday.
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