JOHANNESBURG (Reuters) – The rand firmed on Tuesday, supported by rising risk appetite globally and recovering from a sharp selloff in the previous session when it was hit by a sudden escalation of controlled power cuts in South Africa.
People chat in front of a reception with an electronic board displaying movements in major indices at the Johannesburg Stock Exchange building in Sandton Johannesburg, March 14, 2016. REUTERS/Siphiwe Sibeko
At 1657 GMT, the rand was 0.36 percent firmer at 13.7550 per dollar, compared to its close of 13.8050 the previous day.
The rand tumbled nearly 2.5 percent on Monday to its weakest in nearly three weeks as ailing power company Eskom cut 4,000 megawatts from the national grid after seven generating units unexpectedly went offline.[nL5N20631R]
The power crisis persisted on Tuesday, exposing the frailty of state-owned Eskom despite government promises to revive the utility.
“The reality of developments this week regarding Eskom and its ability to keep the lights on is that it matters not whether the first, but not last, failure of this magnitude was deliberate or the consequence of cumulative neglect, incompetence and lack of expertise,” said Gary van Staden, an analyst at NKC African Economics.
“The consequence either way for the economy is severe and the best laid plans of politicians and policymakers will fail if the power grid does too,” he said.
The yield on the benchmark 10-year South African government bond rose by one basis point to 8.79 percent.
In the equities market retailer and wholesaler SPAR Group Ltd topped the Top-40 blue chip index after reporting a 8.2 percent increase in 17-week sales. [nL5N20748Q]
The grocery and building materials retailer closed 5 percent higher at 199.78 rand.
SPAR lifted sentiment in other retailers as well, such as grocery retailer Pick n Pay and supermarket chain owner Shoprite, which gained 4.09 percent and 2.69 percent respectively.
Recent sales updates from retailers have been a mix bag, with the majority of them on the downside as financially strained consumers spent less on food and clothes.
Gold stocks were also on the rise after bullion rose, supported by a slight pause in the dollar’s rally as the United States and China continue talks aimed at ending their trade conflict. [GOL/]
The gold index jumped 1.9 percent.
Harmony Gold was also supported by a robust first-half operating performance. It rose 2.08 percent to 29.88 rand. [nL5N2070L3]
Bucking the upward trend, EOH Holdings plunged 25.87 percent to 19.80 rand, a level last seen in April 2011 after it said Microsoft has given notice to terminate its channel partner agreement with its subsidiary. [nJseL0032a]
The Johannesburg all-share index closed 1.03 percent higher at 53,960 points, while the top-40 index rose 1.23 percent to 47,807 points.
($1 = 13.7498 rand)
Reporting by Olivia Kumwenda-Mtambo and Nqobile Dludla; Editing by Susan Fenton