By, 3 Min Read* The Rand has dropped the most in two days since late February* Sovereign yields in local, dollar-denominated bonds have risen to near two-month highs* Credit default swaps have risen to near two-month highs* Stocks defy global rally, pulled lower by property and retail. (Updates prices, adds detail, and provides context) Reuters, JOHANNESBURG, July 13 – On Tuesday, the rand fell to a three-month low, and local and hard currency bonds were hit as violent protests against economic hardship and injustice swept the country. Crowds battled with police and looted or set ablaze retail malls, killing dozens of people as resentment over ex-president Jacob Zuma’s imprisonment boiled over into the worst violence in years. Financial markets in Africa’s most industrialized economy were shaken by the protests, with the rand falling as much as 1.8 percent to 14.67 against the dollar, its lowest level since mid-April. The currency has dropped about 3% since Friday’s close, wiping away virtually all of the gains made since the start of 2021, with volatility gauges reaching multi-week highs. For the first time since late June, 10-year local government bond yields surpassed 9%. Longer-dated sovereign dollar-denominated bonds dropped about a cent in the dollar, while the cost of insuring exposure to the country’s debt hit two-month highs. Citigroup, a Wall Street firm, said it had reduced its bond and foreign exchange exposure as a result of the rising violence. “Following a few days of heightened social unrest in South Africa, it is time to take a step back and reflect on the causes and consequences of the current noise,” Citi’s Luis Costa said, predicting that the events would continue and could have “significant consequences” for President Cyril Ramaphosa’s government. Initially prompted by Zuma’s arrest last week, the protests have expanded to include looting and a general outpouring of rage as the economy battles to recover from the effects of Africa’s worst COVID-19 pandemic, and unemployment rates have risen to a record high of 32.6 percent. The all-share index fell 0.3 percent, trailing the MSCI global developing market index, which rose 1 percent. Property and retail companies directly harmed by the looters were dumped by nervous investors, with the property index falling 2.55 percent and the Vukile Property Fund falling more than 7 percent. On Tuesday, SA Corporate announced that four of the 11 retail shopping malls that had been robbed had sustained significant damage. Looters continued to ransack its Game and Makro stores, as well as warehouses, while Massmart, which is majority-owned by Walmart Inc in the United States, led the decliners with a 7.53 percent drop. “Economically sensitive industries are taking a hit, and investors are trying to figure out which ones are the most affected,” said Greg Katzenellenbogen, Portfolio Manager at Sanlam Private Wealth. “We’re dealing with a double whammy: the virus and now the turmoil in the country.” Olivia Kumwenda-Mtambo and Nqobile Dludla reported from Johannesburg, with additional reporting from Marc Jones and Tom Arnold in London; Karin Strohecker wrote the story; Alison Williams edited it./n
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