South Africa’s rand recovers, stocks rise as EM’s back in favour

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South Africa’s rand inched firmer and stocks rose late on Monday as the shock that global oil producers had not decided on an output freeze waned, handing emerging market assets a reprieve.

By 1545 GMT the rand had gained 0.45 percent to 14.4950 per dollar, reversing earlier losses that saw the unit slide to a session low of 14.7500.

“Commodity markets appear to be stabilising. The market seems to have absorbed news that global oil producers have not agreed on any production freeze at the meeting in Doha yesterday,” said ETM Analytics economist Jana van Deventer.

Commodity-linked currencies were hit hard by news that a deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday, sending oil prices tumbling by as much as 7 percent as the global supply glut looked set to continue.

Government bonds also firmed, with the benchmark paper due in 2026 cutting 4.5 basis points to 8.975 percent.

The rand is likely to extend gains and make progress beyond recent technical resistance around 14.60, analysts said, helped by growing market consensus that the United States central bank would only raise interest rates twice in 2016.

“Both fundamentally and technically the USD-ZAR is set to retreat further in the weeks ahead,” traders at Bidvest Bank said in a note, adding the rand could rally as far as to 14.4200, a level it last reached in November.

On the bourse, stocks closed slightly higher as investors brushed aside the sharp fall in oil prices and continued to buy emerging market assets.

The broader All Share Index gained 0.24 percent 53,166 points while the benchmark Top-40 index rose 0.25 percent to 46,879 points.

“There seems to be continued interest buying of emerging markets,” Cratos Capital market analyst Greg Davies said. “The underlying strength of the market is still there.”

Improvement in local assets was also helped by stabilising sentiment after big banks and some businesses cut ties with the Gupta family, which is believed to have undue influence on President Jacob Zuma.

Among the gainers, hotel and casino group Sun International gained 5.14 percent at 81.80 rand, while shares in Barclays Africa rose 4.21 percent at 145.90 rand.

Trading volumes were low, with 193 million shares changing hands compared with last year’s daily average of 280 million.

Source: Reuters