Narrowing deficit boosts rand, bonds

The rand and local bonds emerged clear winners this week, outperforming the JSE, which appeared to be in a consolidation phase after a strong start to the year.

The local currency booked back-to-back weekly gains on the dollar, supported by another batch of improved South African economic data. The local current-account deficit narrowed to 1.7% of GDP in the fourth quarter from 3.8% in the third, its best level in six years.

Local inflation data also moderated, strengthening the view among some economists that the Reserve Bank's monetary policy committee could cut the repurchase rate in the second half of the year.

The rand hovered around R12.42/$ in late trade on Friday, its best level since 2015. The yield on the benchmark R186 government bond flattened, signalling positive market sentiment.

"We are seeing sustained rand strength as economic fundamentals improve, and [in] the absence of any political shocks," said Devin Shutte, head of investments at The Robert Group.

The All Share index settled 1.4% weaker on the week at 51816.30 points, dragged down mainly by a continuing correction in mining stocks.

BHP Billiton led the losses among blue-chip stocks, shedding nearly 7%, followed closely by Life Healthcare and Steinhoff, which dropped 5% and 4% respectively.

The Reserve Bank will take centre stage this week when it announces its rate decision, although analysts expect no policy move after Thursday's meeting.