South Africa's rand firms as risk appetite picks up

JOHANNESBURG, Feb 4 (Reuters) – South Africa’s rand firmed against the dollar on Tuesday as risk appetite picked up after China announced measures to minimise the economic impact from the coronavirus epidemic, but the unit remained vulnerable to concerns over a weak local economy.

At 1505 GMT, the rand traded at 14.7330 per dollar, 0.93% firmer than its previous close.

China’s central bank said on Tuesday that its huge liquidity injections through open market operations this week showed its determination to stabilise financial market expectations and restore market confidence.

The measures came after a coronavirus-led rout that erased almost $400 billion of market value from Shanghai’s benchmark index on Monday.

“Sentiment, however, remains bruised and any indication that cures for or containment of the coronavirus are failing, will trigger another sell-off,” said RMB analyst Nema Ramkhelawan-Bhana.

The rand has tumbled 5.3% against the greenback since the beginning of the year, also hit by signs of weakness in the local economy.

The currency remained vulnerable as problems at state power utility Eskom pile pressure on an already ailing economy.

Eskom last week resumed nationwide blackouts, and said they would continue through the week as it carried out long-delayed maintenance on its creaking fleet of coal plants, threatening already slack consumer demand and business activity.

On the bourse, stocks rose to a more than one-week high, with retailer Steinhoff International topping the gainers following a report of a possible takeover bid for its European retail group Pepco.

Steinhoff soared to a more than seven-month high to record its biggest one-day rise in more than two years. It closed 47.22% firmer at 1.59 rand.

Sky News reported that Advent International, which offloaded Poundland for 200 million pounds ($260.36 million) a decade ago, has teamed up with Hellman & Friedman and Mid Europa Partners to prepare a blockbuster bid that could value Pepco Group at more than 4.5 billion euros ($4.97 billion).

“There might be speculative buying that if that deal goes through it might unlock some value,” said Cratos Capital equities trader Greg Davies.

If the deal is to go ahead, it will provide parent firm Steinhoff with much-needed liquidity after it was forced to write off billions after the revelations of an accounting scandal worth an estimated $7 billion.

The Johannesburg All-Share index jumped 1.77% to 56,817 points, while the Top-40 index climbed 1.98% to 50,892 points as risk appetite returned.

Strong precious metal prices such as palladium, up 2.66% at $2,381, also helped boost platinum miners which were among the top gainers on the bourse.

Impala Platinum jumped 6.98%, Anglo Platinum rose 6.53%, while Royal Bafokeng Platinum climbed 4.55% and Northam Platinum gained 4.48%.

In fixed income, the yield on the benchmark bond was down 1.7 basis points to 7.943%. (Reporting by Olivia Kumwenda-Mtambo and Nqobile Dludla. Editing by Ed Osmond)

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