October 16, 2019 / 4:17 PM / a month ago

UPDATE 1-South Africa's rand rattled by power cuts, stocks led higher by Sibanye

(Updates prices, adds stocks)

JOHANNESBURG, Oct 16 (Reuters) - The rand fell on Wednesday as power cuts by state utility Eskom highlighted the challenges facing South Africa’s ailing economy.

But the weaker currency and strong palladium prices lifted the main South African stock indexes to a 3-1/2-week high.

At 1505 GMT, the rand was 0.47% weaker at 14.9600 per dollar, after earlier hitting a one-week low of 15.0550.

Wednesday’s power cuts, after a number of Eskom generating units broke down, put more pressure on the country’s weak economy ahead of a review by Moody’s on Nov. 1.

Moody’s is the last of the big three credit rating agencies to have an investment grade rating on South Africa.

“The longer it (blackouts) goes on, the worse it will be for the rand,” said currency dealer at TreasuryOne Andre Botha.

Debilitating power cuts in February and March pushed first-quarter economic growth into contraction and raised the likelihood of South Africa losing an investment-grade rating.

On the stock market, Sibanye-Stillwater led the Top-40 index higher as the precious metals miner benefited from deficit-hit palladium.

The metal used in vehicle exhausts to reduce harmful emissions rose 2.4% to $1,774.32 an ounce, after hitting a record high of $1,779.23 earlier.

This pushed Sibanye up 5.44% to 25.01 rand.

The weaker currency also sent commodity stocks such as Harmony Gold up 2.99% to 44.49 rand, AngloGold Ashanti up 2.11% to 300.19 rand and Sibanye.

A weaker rand is beneficial for commodity companies because their exports, sold in dollars, are more affordable.

Healthcare group Mediclinic International rose to its highest level in almost a year, closing 3.83% higher at 70.50 rand after saying it expects higher first-half core earnings.

The Johannesburg All-Share index rose 0.93% to 56,090, while the Top-40 index gained 0.94% to 49,855 points.

“Today you’ve got everything going positive. The gold index is up (2.18%) and the resources are a bit better because of the weaker rand,” Cratos Capital equities trader Greg Davies said..

In fixed income, the yield on the benchmark government bond due in 2026 was up 3.5 basis points to 8.27%. (Reporting by Mfuneko Toyana, Olivia Kumwenda-Mtambo and Nqobile Dludla; Editing by Alexander Smith)

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