Rand hits record low after Nene booted

SA assets suffered in the wake of President Zuma's sacking of Nhlanhla Nene, pushing the rand to an all-time low.

Johannesburg - South African assets suffered on Thursday in the wake of President Jacob Zuma's shock sacking of the finance minister, pushing the rand to an all-time low, bonds to their weakest since recession times and stocks lower.

By 1545 GMT the rand had weakened 1.3 percent to 15.1650 per dollar, paring some losses after plunging more than 5 percent overnight to a record low of 15.3460.

Yields on government bonds rose rapidly as investors fled, with the benchmark paper due in 2026 adding as much as 120 points at one stage to its highest level in seven years.

Investors also dumped the country's sovereign dollar bonds, with the average yield premium demanded by investors to hold South African debt compared to U.S. Treasuries surging to 6-1/2 year highs on the EMBI Global index.

South Africa last slipped into recession in 2009 as the global financial crisis took its toll on the economy.

Rating's agency Fitch, which downgraded South Africa to just one step above sub-investment grade last Friday, said Nhlanhla Nene's exit raised fiscal policy questions.

Financials dragged the bourse lower as the banking index shed more than 13 percent, with FirstRand slumping to a 19-month low.

“The markets are worried about the possibility of another downgrade by credit ratings agencies and that it could increase the cost of funding for South African banks,” Old Mutual Investment Group analyst Neelash Hansjee told Reuters.

The JSE Top-40 index ended 0.66 percent lower at 44 250 points and the broader All-share index declined 1.1 percent to 48,984.

Trade was frantic as 615 million shares changed hands on the stock market, according to preliminary bourse data, well above last year's average of 183 million shares.

Reuters