VODACOM:  12,600   -6 (-0.05%)  17/06/2019 00:00

South Africa's rand firms on Chinese investment; stocks rally

* Rand rises to three-day high

* Kumba Iron Ore gains on new dividend policy (Updates rand and stocks; Adds traders comments)

JOHANNESBURG, July 24 (Reuters) - South Africa's rand firmed more than one percent on Tuesday to a three-day best as demand for the local currency was boosted by China's promise of a $14.7 billion investment.

Stocks rose, led by Kumba Iron Ore after it reported a new dividend policy.

At 1420 GMT the rand was 1.04 percent stronger against the dollar at 13.3200 from its close on Monday.

President Ramaphosa announced the investment agreement at a news conference after talks with Chinese President Xi Jinping.

Traders said the investment had provided some temporary relief from the risk-off sentiment affecting the rand and other emerging market currencies.

"The news that China would invest in the local economy has supported some foreign inflows," said senior trader at Standard Bank Oliver Alwar.

Traders noted that a sliding greenback had lifted most emerging market currencies, and that the size of the rand's move firmer was partly down to low trading liquidity.

"I don't expect that there is going to be a huge bull trend coming into the emerging market. There are just too many uncertainties with the trade wars," said Ashley Dickinson, trader at SASFIN.

The rand has seen volatile trade in the past two weeks, and fell sharply last Thursday when the central bank warned that risks to inflation were rising and the outlook for economic growth had worsened.

The currency however remains a favoured carry-trade target owing to the return offered by low inflation and relatively high lending rates against a backdrop of economic reform promised by Ramaphosa since his election in February.

Bonds also gained, with the yield on the benchmark paper due in 2026 up 4.5 basis points to 8.73 percent.

On the bourse, shares tracked a global stock market rally.

The blue-chip Top-40 index closed up 1.01 percent at 50,990 points, while the broader All-Share index rose 0.88 percent to 57,055 points.

Kumba was one of the biggest gainers, up 2.9 percent to 299 rand after unveiling a new dividend policy that will distribute 50 percent to 75 percent of headline earnings.

On the flipside, telecom group Vodacom shed 2.6 percent to 125.51 rand.

"Vodacom missed market estimates, as analysts thought the numbers would be even better," said Cratos Capital equities trader Greg Davies.

Vodacom, South Africa's biggest mobile phone operator by market value, reported a 4.2 percent rise in group revenue for the first quarter. (Reporting by Patricia Aruo, Mfuneko Toyana and Nomvelo Chalumbira Editing by James Macharia)

First Published: 2018-07-24 13:47:02
Updated 2018-07-24 17:57:32

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