* Banking index down 1.78 pct
* Rand recovers, risks remain high
* Bonds under pressure
(Adds closing levels, analyst comment)
JOHANNESBURG, April 6 South Africa's banking
index hit its biggest daily loss since December 2015 on
Thursday, dragging the bourse down after S&P cut the credit
ratings of major lenders following a sovereign downgrade.
The rand firmed slightly, after tumbling more than
11 percent since March 27 when President Jacob Zuma ordered then
finance minister Pravin Gordhan to return home from overseas
meetings with investors, days before dismissing him in a cabinet
reshuffle that triggered the downgrade.
The banking index fell 1.78 percent, its biggest
daily loss since Dec 2015 when President Jacob Zuma changed
finance ministers twice in a week.
"What usually happens is that hedge funds have mandates when
things get downgraded to junk ... to de-leverage or sell out
because they are not allowed to hold risky debt on their books,"
BP Bernstein trader Vasili Tirasis said.
The broader All-Share index fell 0.14 percent to
52,918 points, while the benchmark Top-40 index inched
up 0.04 percent to 46,170 points.
Capitec Bank fell 4.85 percent to 720 rand, while
FirstRand dropped 0.82 percent at 44.90 rand, Standard
Bank weakened 1.64 percent to 136.47 rand and Nedbank
declined 1.35 percent to 225.80 rand.
On the foreign exchange market, at 1500 GMT, the rand
traded at 13.7675 per dollar, 0.31 percent stronger
from its New York close on Wednesday.
"Let's be clear, rand risks remain high and further losses
cannot be ruled out. But there are at least some signs of
stability," said Rand Merchant Bank currency strategist John
In fixed income, the yield for the benchmark government bond
due in 2026 rose 1.5 basis points to 9.020 percent.
Local bonds might continue to struggle as political turmoil
in the country and uncertainty around Fitch's possible "junk"
rating lures money managers away.
"The bond market trading at more than 9 percent, that is a
very penalising yield to be paying, obviously because of the
recent political developments," said Efficient Group chief
economist Dawie Roodt.
Downgrades to junk from at least two agencies would see
South Africa drop out of some widely used global bond indexes
and force international funds which track them or which are
prohibited from holding sub-investment grade securities to sell.
(Reporting by Olwethu Boso; Editing by James Macharia)