The JSE closed weaker on Wednesday, along with the rand, as investors digested finance minister Tito Mboweni’s supplementary budget speech.
Before the speech, the rand had already lost about 0.7% to R17.32/$. As Mboweni finished speaking, the rand had weakened further, down 0.9% to R17.35/$, before falling still further into the evening.
Analysts believe that the speech lacked details on how the plans will be carried out, creating uncertainty for investors.
“The rand is the worst performing emerging-market currency after the Brazilian real. The reason for that is because there is no clear fundamental picture that businesses and investors can believe in and grab on to for the future,” said Efficient group senior economist Francois Stofberg.
“For businesses to invest in SA, and to really believe that they are doing well to bring their short- and long-term capital here, they need more robust guidance and more robust action. Once again, we didn't hear anything about how the government is going to change the fundamental nature of how money is going to be spent,” said Stofberg.
At 6.23pm, the rand had weakened 1.08% to R17.3902/$, 0.81% to R19.6093/€ and 0.48% to R21.6358/£. The euro fell 0.28% to $1.1279. The rand has now lost more than 19% to the dollar in 2020.
“There wasn't a lot of new information available in the budget speech and the market has priced in everything that it already knows. If we had had a lot of good news about reforms, wage bill settlements etc, then the rand might have strengthened,” said Old Mutual Investment Group portfolio manager John Orford. On the other hand, there had not been much new bad news, which would have sent the rand “a lot weaker”. What came was largely expected, he said.
The JSE all share lost 1.85% to 54,447.73 points and the top 40 1.95%. The bourse tracked lower international markets as concern grows that the second wave of Covid-19 will interrupt a global economic recovery.
Platinum miners dropped 5.63%, resources 2.41%, financials 1.08%, banks 0.81 and gold miners 0.6%.
“The equity market ended lower, in line with global markets. Lower consumption expenditure by government and the hinting of potential tax increases to come will be negative for the equity market in the short to medium term,” FNB Wealth and Investments investment research head Chantal Marx said.
“A commitment to structural reform and an ambitious infrastructure programme could boost growth longer term, which will have an ultimately beneficial impact on the market — if executed,” Marx said.
Gold lost 0.19% to $1,764.71/oz and platinum 3.16% to $800.52. Brent crude dropped 5.15% to $40.16 a barrel.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.