South Africa's rand slides after central bank holds rates, stocks down


Rand at three week low

Stocks down on poor companies performance

Central bank hold rates, cuts growth forecast again

Updates prices

JOHANNESBURG, May 23 (Reuters) - South Africa's rand slipped nearly 1 percent to a three-week low and stocks fell on Thursday after the central bank kept lending rates unchanged, cut its growth forecast and struck a dovish tone that suggested a cut was on its way.

At 1500 GMT the rand was 0.64% weaker at 14.4650 per dollar, off a session low of 14.5350 hit soon after the South African Reserve Bank (SARB) decided to leave lending rates at 6.75% for the third meeting in a row.

"Although the Bank decided to keep interest rates on hold at their meeting, the statement was decidedly more dovish than their March statement," said Nazmeera Moola, head of investments at Investec Asset Management.

"The logical conclusion is that the SARB is likely to cut interest rates by 25 basis points at their July MPC meeting -- barring any major rand weakness in the intervening period," Moola said.

The bank's five-member policy committee voted 3-2 to keep rates on hold. Governor Lesetja Kganyago said while inflation and inflation expectations were close to the middle of the bank's 3% to 6% target range, they had not yet settled there.

The bank was bearish on economic growth, slashing its 2019 outlook to 1% from a 1.5% forecast in January.

Bonds were firmer, with the yield on the benchmark 2026 ZAR186= down 3 basis points to 8.38 percent, its lowest since May 2018.

Stocks fell as local companies felt the pinch of a slow economy and a squeezed consumer.

The broader All-Share index .JALSH weakened 1.74% to 54,271 points, while the Top-40 index .JTOPI fell 1.84% to 48,290 points.

Tiger Brands TBSJ.J, which dropped 5% to 218.50 rand, also continued to weaken after it reported half-year revenue falling short after challenges at its meat unit.

"Tiger Brands is operating in an environment that is quite difficult at the moment," said Michael Ledwidge, a stockbroker at AG Capital.

Massmart MSMJ.J declined 13.14% to 67.75 rand after it flagged 50% lower headline earnings than the year before while Steinhoff SNHJ.J shed 10% before recovering to 1.35 rand, a 4.93% decline.

The biggest faller among blue chip stocks in the Top-40 index was Sasol SOLJ.J, which fell for a second consecutive day, shedding 5.72% to 353.55 rand, after it raised the expected cost of its U.S. ethane cracker project by around $1 billion.

(Reporting by Mfuneko Toyana and Onke Ngcuka; Editing by Catherine Evans)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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