The rand turned weaker against the dollar on Wednesday afternoon as generally positive sentiment about finance minister Enoch Godongwana’s maiden budget gave way to ever-mounting concerns about the crisis in Ukraine.
The JSE, meanwhile, tracked weaker global markets where investors are on edge after Ukraine moved to introduce a state of emergency and the US and its European allies increased pressure on Russia by imposing sanctions and threatened that more could follow.
After briefly strengthening to below R15/$ earlier in the day, the rand was trading 0.12% weaker at 15.086/$ at 6.29pm. It was also 0.17% weaker at 17.0743/€, but it had strengthened 0.2% to R20.4451/£. The euro was little changed at $1.1318.
Key points in the budget include a GDP growth forecast of 2.1% for 2022 being in line with expectations, a primary surplus (or revenue exceeding non-interest expenditure) by 2023/2024 — a year earlier than expected at the time of the medium term budget policy statement — and a significant strengthening in revenue that has enabled tax relief which should be supportive of economic growth.
However, analysts were quick to caution that implementation remains critical.
“Despite being another market-friendly budget, implementation will again be key, particularly on the reform and expenditure fronts,” said Chantal Marx, head of investment research at FNB Wealth and Investments. “The political will to drive growth and boost revenue [and] keeping expenses in check will once again prove vital.”
The JSE closed 0.88% lower at 74,987.05 points, driven primarily by weaker resources and mining companies.
“BHP Group, which makes up a huge chunk [of the mining metals sector] traded ex-dividend” — the shares closed 4.78% lower — while the relatively stronger rand “weighed on the sector generally,” said Marx.
While the situation in the east of Ukraine remains tense and uncertain, analysts note that the volatility associated with political and/or military crises can offer buying opportunities unless events push the global economy into recession.
At 7.16pm, the Dow Jones industrial average was flat at 33,582.79 points, while the S&P 500 was down 0.16%. In Europe, London’s FTSE 100 closed little changed at 7,498.18 points, while Germany's DAX closed 0.42% lower and France’s CAC 40 was 0.1% weaker.
Wilson Bayly Holmes-Ovcon shares fell 27.11% to R82 — their biggest one-day loss on record — after the construction group said its Australian division is headed for business rescue after the withdrawal of group financial support.
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.