Market news amid university uprisings, Pravin Gordhan and political unrest
The rand took a beating of 4% after Pravin Gordhan was accused, but has since recovered by 2.5% again. The JSE All Share Index declined slightly, but overall, the rand seems to be heading in the right direction again because of support in favour of Pravin Gordhan.
Government bonds also gained on Friday, and the yield on the benchmark instrument due in 2026 slipped 9.5 basis points to 8.81%. Stocks were also up, with the benchmark Top-40 index climbing 1.45% while the All-Share index rose 1.2%.
Although the Gordhan saga played a major role in the rise and fall of the rand, international markets also contributed. The NASDAQ decreased by 1.75% and the Hang Seng with 0.84%. Europe’s Stoxx 600 is down by 3% and this was mainly due to uncertainty with regards to their, as well as the Federal Reserve Bank’s interest rate policy.
What does this mean for credit rating agencies?
Investors have been worried that Gordhan could be removed from office over the charges, halting efforts to revive economic growth and raising the risk of a credit rating downgrade to “junk”.
It is important to understand what criteria credit rating agencies will look at. Security, stability and growth are key when considering a country’s credit rating. Credit agencies will be watching the Pravin Gordhan case unfold, but are also cautious to not get caught up in political noise. It is important, though, that South Africa sticks to its fiscal targets set in the budget in February.
Trevor Manuel seems less optimistic about the country’s current status: “In many respects my sense is that the die is cast,” Manuel said in a speech in Johannesburg. “When the country gets downgraded to below investment grade, the people who pay the price are the poor because there’s less money available to deliver public service. It’s people who are more dependent on the state for their very existence who actually pay the price of the carelessness of some.”
Revaluate your investment portfolio
Diversification in a portfolio is key. When looking at assets, make sure these are balanced- whether it be in property, international investments and the exposure risks, and that you are working with an accredited financial advisor. Look at fixed term investments and stick to your investment plan.
The week ahead
With many companies having released their interim results, this is a good opportunity for investors to get some lucrative deals and yet again diversify their portfolios.
Investors are counting on large U.S companies to stop a year-long streak of profit declines. Some of the concerns remain weak economic data in China, ever-growing concerns over Britain’s exit from the European Union, as well as possible interest rate hikes before year-end from the Federal Reserve Bank.