© Reuters. South African Assets Retreat as Recession Fuels Downgrade Fears
(Bloomberg) — South Africa’s rand extended the worst decline among emerging-market peers as data showed the country’s economy had slipped into a recession for the first time since 2009. Stocks and bonds also fell.
The rand weakened as much as 2.6 percent after data showed gross domestic product unexpectedly contracted in the second quarter, raising the nation’s risk profile at a time when emerging-market assets are under pressure from a rising U.S. dollar and global trade tensions. It also increases the chance of a credit downgrade by Moody’s Investors Service, which would plunge the country’s local-currency debt into junk status.
“Equities, bonds, rands… It’s awful,” said Abri du Plessis, a portfolio manager at Gryphon Asset Management Ltd. in Cape Town. “I’m struggling to see any light. There is now a distinct possibility that there will be a downgrade by year-end and we won’t see the end of it for South Africa’s markets.”
The fell to 15.2238 per dollar by 12:12 p.m. in Johannesburg. The yields on benchmark 2026 government bonds climbed 17 basis points to 9.17 percent. The benchmark stock index fell 0.4 percent, spurred by a 3.1 percent slump in the banking gauge.
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