South Africa's rand weaker, stocks fall before US midterm elections

JOHANNESBURG: South Africa's rand fell on Tuesday and stocks snapped a four-session winning streak, with markets favouring caution ahead of U.S. midterm Congressional elections as policy decisions that could sway the world's largest economy hinge on the results.

At 1515 GMT, the rand traded at 14.2150 per dollar, 0.37 percent weaker, having closed at 14.1625 on Monday.

Investors are bracing for a split Congress, with Democrats taking control of the House of Representatives and Republicans holding their advantage in the Senate, but are mindful that President Donald Trump's victory in 2016 surprised experts.

A split Congress would likely reduce trade tensions, while the dollar could come under pressure as it is unlikely any new fiscal stimulus could be launched to counterbalance forecasts of slowing U.S. economic growth next year.

"Investors appear to have adopted a wait-and-see approach to guard against the unknown," Rand Merchant Bank analyst Nema Ramkhelawan-Bhana said in a note.

"A surprise Republican win in both chambers could embolden Trump to take stronger trade measures, spurring U.S. dollar strength and amplifying asset price volatility."

In fixed income, the yield on the benchmark government bond due in 2026 fell one basis points to 9.14 percent.

On the bourse, both the blue chip Top-40 index and the All-share index fell 0.85 percent to 48,124 points and 54,450 points, respectively.

"There is not much conviction on the buying side so volumes have been thin. There is some uncertainty around the U.S. election and as an emerging market we often bear the brunt of this," said Ryan Woods, equities trader at Independent Securities.

Shares in South African engineering firm Group Five fell nearly 14 percent in the session after it said that construction on its Ghanaian Kopje power plant had been delayed once again due to fuel contamination.

Group Five closed 0.86 percent lower at 1.15 rand.