South African rand hits 2-month low after Moody's comments on Eskom
(Updates rand, bond prices, adds stocks)
JOHANNESBURG, Aug 6 (Reuters) - South Africa's rand weakened
to two-month lows in late afternoon trade on Tuesday, giving up
gains earlier in the session, after ratings agency Moody's said
power utility Eskom urgently needs a turnaround plan as its
capital structure is unsustainable.
At 1535 GMT, the rand was 0.4% weaker at 14.9800
per dollar, having hit a session low of 15.000 - its weakest
since June 7. The currency had also fallen sharply on Monday
after an escalation in the U.S.-China trade war.
Cash-strapped power utility Eskom said last week it expects
to make a 20 billion rand ($1.34 billion) net loss in the
current 2019/20 financial year after the 20.7 billion rand loss
in 2018/19, exposing the country's public finances to grave
risks at a time of fiscal constraints.
The government has proposed giving Eskom a 59 billion rand
cash injection over the next two financial years, in addition to
230 billion rand of bailouts spread over the next decade.
"The current capital structure is not sustainable, absent
continued government cash transfers, indicating a strong and
urgent need for a longer term strategic turnaround plan,"
Moody's said in a research note.
Moody's is the last of the three big international ratings
agencies to have South African debt at investment grade. South
Africa's rating with S&P Global Ratings and Fitch has been
non-investment grade since 2017.
On the bourse, stocks snapped a two-session losing streak as
a rout in global markets eased as signs Beijing is keen to stem
the yuan's slide soothed markets unnerved by the Trump
administration's labelling of China as a currency manipulator.
The Johannesburg All-Share index closed 0.16%
firmer at 55,062 points, while the Top-40 index ended
the day 0.1% up to 49,113 points, after both weakened to levels
last seen on May 30 on Monday.
The top performer was Rebosis Property Fund, which
surged 14.29% to 56 cents after it said it is considering a
merger with Delta Property Fund.
"It is positive in the sense that if they put together their
balance sheets they might have a picture that looks different.
It's a great opportunity to save both from this tough internal
and external environment they face," Inkunzi Investments
director Owen Nkomo said.
Gold stocks continued to shine, with prices consolidating
near the highest in more than six years as the trade war drove
investors to safe-haven assets. The Gold Index closed
"Gold is positioned to remain one of the prime destinations
of safety this week," Lukman Otunuga, Senior Research Analyst at
FXTM said in a note.
The yield on the benchmark government bond due in 2026
shed a single basis point to 8.43%.
($1 = 14.9249 rand)
(Reporting by Alistair Smout, Olivia Kumwenda-Mtambo and
Nqobile Dludla, editing by Ed Osmond)
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