March 11, 2019 / 4:29 PM / 3 months ago

UPDATE 1-South Africa's rand firms on improved risk appetite, Naspers lift stocks

(Updates prices)

JOHANNESBURG, March 11 (Reuters) - South Africa’s rand firmed on Monday, helped by increasing demand for emerging market currencies amid a slew of disappointing economic data in developed markets and growth warnings from central banks.

Stocks also rose, boosted by e-commerce and technology giant Naspers, though a fall in the shares of financials after weak results capped gains on the Johannesburg All-Share index.

At 1525 GMT the rand was 0.55 percent firmer at 14.3550 per dollar, moving higher in tandem with developing-world peers.

Employment growth in the United States for February came in much weaker than expected last week, triggering a revival in demand for risk assets as U.S. Treasury yields dived.

“Global data continues to suggest that the bar for higher rates in the U.S. remains high. This is on the back of the mixed labour data as well as comments from (Federal Reserve Chairman Jerome Powell),” RMB analyst Gordon Kerr said in note.

“We remain constructive on the outlook for both (South African) bonds and currency as we move towards the Moody’s rate decision at the end of the month,” he added.

Powell said on Sunday the U.S. central bank does “not feel any hurry” to change the level of interest rates again as it watches how a slowing global economy affects local conditions in the United States.

Expectations of lower U.S. interest rate expectations often boost investors’ appetite for emerging market assets, which offer higher returns but carry more risk.

The rand has moved away from two-month lows of 14.5825 hit last week, although the currency remains vulnerable to domestic risks mainly linked to power utility Eskom and the threat it poses to the country’s sovereign credit risk.

In fixed income, yield on the benchmark paper due in 2026 closed flat at 8.665 percent.

FINANCIAL STOCKS DIP

In stocks, the financial index fell 1.59 percent as South Africa’s No.2 insurer Old Mutual dropped 5.46 percent to 20.59 rand after a 12 percent drop in adjusted full-year earnings and Absa Group fell 3.10 percent to 167 rand after the bank’s annual headline earnings per share dipped.

Tongaat Hulett fell 19.32 percent after its chief executive said last week that a review of past accounting practices at the firm could affect previously reported financial information.

Helping the market gain ground was market heavyweight Naspers, which ended the session 2.44 percent stronger at 3,146.53 rand, thanks largely to its one-third stake in Chinese internet group Tencent.

BP Bernstein trader Vasili Girasis said Naspers had gained on the back of news that China’s content regulator has approved the monetisation of 95 new video games, including titles from Tencent Holdings.

Aspen Pharmacare started the week 1.82 percent stronger following an aggressive sell-off on Friday, which saw the multi-national drugmaker lose almost a third of its value on concerns about ballooning debt.

The Johannesburg All-Share index rose 0.17 percent to 55,580 points while the Top-40 index climbed 0.31 percent to 49,387 points. (Reporting by Olivia Kumwenda-Mtambo and Nqobile Dludla Editing by Gareth Jones)

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