{"id":881465,"date":"2026-10-26T16:13:52","date_gmt":"2026-10-26T14:13:52","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=881465"},"modified":"2026-10-26T16:13:56","modified_gmt":"2026-10-26T14:13:56","slug":"bubble-warning-for-the-rand","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/881465\/bubble-warning-for-the-rand\/","title":{"rendered":"‘Bubble’ warning for the rand"},"content":{"rendered":"\n

The rand has lost ground over the past week, with markets worried about AI tech stocks being in bubble territory, leading to some risk aversion.<\/p>\n\n\n\n

This has placed the rand on the back foot in the new week, despite positive signals from ratings firm Moody’s about South Africa’s economy.<\/p>\n\n\n\n

On Monday, 26 October, the rand was trading at R16.66 against the US dollar, weaker than its close on Friday following a well-received MTBPS.<\/p>\n\n\n\n

According to Investec Chief Economist, Annabel Bishop, the rand is weaker due to a stronger dollar, which has strengthened amid risk aversion.<\/p>\n\n\n\n

At the same time, gold\u2014a key export for South Africa\u2014has also dropped sharply, adding to the pain caused by continued pressure from global oil prices.<\/p>\n\n\n\n

The risk aversion comes amid worries over a bubble in the tech sector.<\/p>\n\n\n\n

Strategists warn that declines in shares of AI cloud computing providers will spill over into other corners of the tech sector, potentially dragging markets down.<\/p>\n\n\n\n

While analysts are trying to wave off worries over a bubble in AI tech, markets cannot shake the concerns.<\/p>\n\n\n\n

Investors are concerned about the amount of debt companies involved in the AI build-out have borrowed and are worried about how much more they\u2019ll take on after reporting earnings. <\/p>\n\n\n\n

These fears pushed credit risk measures for some of the biggest technology companies spending on AI development to new highs last week.<\/p>\n\n\n\n

Bloomberg reports pointed to AI-linked equities baskets tanking 4.9% as investors pushed into more stable treasuries.<\/p>\n\n\n\n

At the same time, the gold price has returned to $4,016\/oz, the same level in July this year and October last year, putting pressure on South Africa from this end.<\/p>\n\n\n\n

“The drop in the gold price has come on the back of the jump in oil prices, to over US$115 a barrel for Brent crude and worries over higher interest rates,” Bishop noted.<\/p>\n\n\n\n

She added that oil prices are rising as Iran intensifies strikes on oil tankers and the Strait of Hormuz experiences a sharp drop in tanker traffic.<\/p>\n\n\n\n

The severity of the problem has prompted the US to consider lifting sanctions on Russian oil tankers, but not on Russian oil, she said.<\/p>\n\n\n\n

Adding to the mix, the Northern Hemisphere winter is approaching, with oil used for heating. <\/p>\n\n\n\n

“While the global El Ni\u00f1o weather phenomenon is expected to reduce demand for heating oil, along with high prices, there is no absolute certainty in weather predictions,” she said.<\/p>\n\n\n\n

Good news from Moody’s not doing much<\/h2>\n\n\n\n
\"\"<\/a>
Investec Chief Economist, Annabel Bishop<\/figcaption><\/figure>\n\n\n\n

The weaker rand comes despite a positive Medium Term Budget Policy Statement (MTBPS) review from ratings firm Moody’s.<\/p>\n\n\n\n

In a post-MTBPS note, the rating agency said that the mid-term budget from the Treasury was credit positive for the country.<\/p>\n\n\n\n

This was driven by fiscal consolidation despite monetary policy tightening, while weaker nominal GDP affected fiscal ratios.<\/p>\n\n\n\n

“The credit rating agency, one of the key three, together with Fitch and S&P, expects debt to reach 84.9% of GDP in two years\u2019 time from 86.8% of GDP last year, on a peaking in the country\u2019s debt ratios to GDP,” Bishop said.<\/p>\n\n\n\n

In addition, the MTBPS projections show a rising consolidated primary surplus even with increased infrastructure spending planned, which Moody\u2019s evidences as a particularly notable commitment to fiscal consolidation.<\/p>\n\n\n\n

There are also upside risks to tax collections, a key driver of fiscal consolidation.<\/p>\n\n\n\n

“Elevated debt service costs are the biggest binding constraint on the state, and so on fiscal consolidation,” Bishop said.<\/p>\n\n\n\n

Moody\u2019s added that interest payments as a percentage of revenue are higher for South Africa than for most of its rating peers.<\/p>\n\n\n\n

Moody\u2019s previously indicated that South Africa is in line for a credit rating upgrade, having revised the outlook to positive in May this year.<\/p>\n\n\n\n

While no rating action took place, South Africa’s rating was affirmed at BB, with an upgrade likely in around eighteen months, Bishop said.<\/p>\n","protected":false},"excerpt":{"rendered":"

The rand has lost ground over the past week, with risk aversion setting in as investors eye a tech bubble in the US.<\/p>\n","protected":false},"author":10,"featured_media":841888,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"failed","_sma_x_autopost_error":"Instagram publishing failed: Instagram returned HTTP 400: Media ID is not available","_sma_x_post_id":"2114723484949459100","_sma_facebook_post_id":"191437357620492_2249876479166084","_sma_instagram_post_id":"","_sma_x_attempts":1,"footnotes":""},"categories":[11121],"tags":[19853,3670],"class_list":["post-881465","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-annabel-bishop","tag-rand"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/881465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=881465"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/881465\/revisions"}],"predecessor-version":[{"id":881468,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/881465\/revisions\/881468"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/841888"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=881465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=881465"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=881465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}