| LONDON, April 20
LONDON, April 20 The South African rand rose on
Thursday and local bond yields fell to three-week lows, helped
by slowing inflation, the government's rejection of
nationalisation and the tailwind of a weaker dollar.
The rand firmed 0.7 percent against the dollar to a
three-week high and the 2026 benchmark government bond yield
fell after consumer inflation eased in March and
Finance Minster Malusi Gigaba dismissed calls from one of his
own advisers for the nationalisation of banks and mines.
The average yield spread paid by South African sovereign
bonds over U.S. Treasuries on the JP Morgan EMBI
Global Diversified also narrowed 6 basis points (bps) to
278 bps, a two-week low, outperforming the broader index.
South African assets have weathered a turbulent period, hit
by two credit ratings downgrades to junk following the sacking
of business-friendly finance minister Pravin Gordhan. Gigaba's
comments show an attempt to calm investors.
But S&P Global Ratings warned on Wednesday that South
Africa's credit rating could get downgraded deeper into junk
territory if ongoing political uncertainty stalls the reforms
needed to grow the economy.
"Of the big countries, that's the one that has more risk
attached to it politically, even more so than Turkey," said
Daniel Moreno, an emerging markets debt fund manager at Rubrics
"In Turkey there is certainty, in South Africa there isn't.
They need a very stable government with a very clear policy and
they don't have that. As long as we have a country that is
driven by internal politics at the ANC, I don't see how it can
get any better."
With the dollar slipping 0.3 percent against a basket
of currencies, most other emerging currencies also made gains.
The Turkish lira firmed 0.7 percent, having steadied
since the April 16 referendum that granted President Tayyip
Erdogan sweeping new powers. A Reuters poll indicated, however,
that the economy was unlikely to see much of a tailwind this
The government says the constitutional changes will make it
easier to push through investor-friendly reforms to labour and
tax laws, boosting growth. But investors are concerned about
Erdogan tightening his grip on monetary policy and the economy.
The Russian rouble also firmed 0.3 percent as oil
prices steadied after falling 3.5 percent on Wednesday.
MSCI's benchmark emerging equities index rose 0.3
percent, with Asian markets rebounding after a turbulent few
Emerging Europe delivered a more mixed performance, with
Turkish and Hungarian stocks up 0.5-0.8 percent,
but Russian shares fell 0.7 percent.
Investors have been rattled by uncertainty over the upcoming
French presidential election, and tensions with North Korea,
with the United States piling on the pressure following the
reclusive state's failed missile test on Sunday.
But South Korean stocks closed up 0.5 percent at a
near two-week high, Hong Kong shares rose almost 1
percent and Chinese mainland stocks gained 0.5 percent
after a four-day losing streak.
China's yuan steadied after the country's foreign
exchange regulator said capital outflows had eased sharply in
the first quarter.
Banking sources said the central bank had relaxed some of
its curbs on cross-border capital outflows, suggesting it feels
more confident about the yuan.
The Indonesian rupiah fell 0.2 percent against the
dollar to a two-week low, as polls showed foreign-friendly
candidate Basuki Tjahaja Purnama had lost his bid for
re-election as governor of Jakarta.
Indonesian prosecutors have called for a one-year jail term
for Purnama on blasphemy charges.
The Bank of Indonesia is expected to keep its key interest
rate unchanged at 4.75 percent on Thursday.
For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml
For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see)
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 956.05 +3.13 +0.33 +10.88
Czech Rep 971.21 +3.67 +0.38 +5.38
Poland 2271.35 -3.34 -0.15 +16.60
Hungary 32924.75 +236.66 +0.72 +2.88
Romania 8195.74 -0.37 -0.01 +15.68
Greece 677.87 -1.09 -0.16 +5.32
Russia 1066.65 -1.90 -0.18 -7.44
South Africa 45595.25 -176.71 -0.39 +3.86
Turkey 91337.24 +533.11 +0.59 +16.89
China 3172.59 +1.90 +0.06 +2.22
India 29382.35 +45.78 +0.16 +10.35
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 26.92 26.88 -0.13 +0.33
Poland 4.26 4.26 -0.09 +3.38
Hungary 312.71 313.11 +0.13 -1.24
Romania 4.54 4.54 -0.01 -0.04
Serbia 123.48 123.52 +0.03 -0.11
Russia 56.34 56.51 +0.30 +8.74
Kazakhstan 312.51 311.53 -0.31 +6.76
Ukraine 26.75 26.74 -0.04 +0.93
South Africa 13.17 13.27 +0.76 +4.26
Kenya 103.27 103.30 +0.03 -0.87
Israel 3.66 3.67 +0.14 +5.15
Turkey 3.65 3.67 +0.67 -3.31
China 6.88 6.89 +0.03 +0.86
India 64.61 64.64 +0.05 +5.16
Brazil 3.15 3.15 +0.08 +3.31
Mexico 18.82 18.85 +0.12 +10.05
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 333 -1 .01 7 77.19 1
(Additional reporting by Marc Jones; Editing by Mark Trevelyan)