JOHANNESBURG (Reuters) - South Africa’s rand gave up its modest gains on Friday ahead of a ratings decision by Moody‘s, erasing the benefits of higher commodity prices as traders treaded cautiously and avoided large bets.
Stocks fell to 1-1/2-week lows, their worst daily performance since mid-July, as market heavyweight Naspers weakened after China launched a cyber investigation into its top social media sites.
At 1520 GMT the rand had weakened 0.25 percent to 13.4950 per dollar, inching towards a one-month low hit late on Tuesday after President Jacob Zuma survived a no-confidence vote by secret ballot.
On Monday, the rand had rallied to 13.1125 after the parliamentary speaker said she would allow a secret vote, with markets betting it could embolden members of the ruling African National Congress (ANC) to vote against Zuma.
The ruling party closed ranks and defeated the vote, dragging the currency to its weakest since July 12.
Market participants said focus had shifted to the Moody’s decision due later on Friday and the fate of an economy stuck in recession, with traders short-selling the rand and adopting a wait-and-see approach while eyeing policy and political developments.
“The hope is Moody’s won’t do anything until the ANC’s elective conference in December, which they see as a policy defining moment,” said chief economist at Nedbank Dennis Dykes.
South Africa’s sovereign debt was cut to sub-investment by Fitch and S&P Global Ratings in April after Zuma fired Pravin Gordhan as finance minister. In June, Moody’s cut its rating to one notch above junk with a negative outlook.
In equities, e-commerce group Naspers dragged the bourse into the red, weakening 2.83 percent to 2764.53 rand after China launched an investigation that will include the South African media company’s subsidiary Tencent’s WeChat.
The JSE All-Share index fell 0.98 percent to 55,155 points, while the Top-40 index declined 1.09 percent to 48,766 points.
Stocks were also hit by rising tension between North Korea and the United States as it set in motion risk-aversion.
“The war of words between the two nations is putting investors on high alert, and more comments from President Trump overnight have resulted in additional risk-off being seen in the markets,” ForexTime research analyst Lukman Otunuga said.
Banks slipped 0.58 percent while financials fell 0.71 percent as investors looked ahead to Moody‘s.
Bonds weakened, with the yield on the benchmark paper due in 2026 up 4.5 basis points to 8.645 percent.
Reporting by Mfuneko Toyana and Nqobile Dludla, editing by Alister Doyle