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| Rand snaps five-day gain on MTN deal concern |
| Bloomberg / May 26, 2009, 00:53 IST |
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South Africa’s rand snapped a five-day rally as some investors said they were concerned a proposed merger of the biggest mobile-phone operators in India and Africa may drain funds from the continent’s largest economy.
The rand retreated from an almost eight-month high after New Delhi-based Bharti Airtel said it was in talks with MTN Group to form a company stretching from the Cape of Good Hope to the Himalayas with revenue of more than $20 billion and 200 million customers.
As part of the deal, MTN and its shareholders may buy 36 per cent of Bharti, Bharti said. South Africa’s currency declined as much as 0.9 per cent to 8.3506 a dollar and traded at 8.3225 by 9:52 a.m. in Johannesburg, down 0.5 per cent.
It slipped versus 13 of the 16 most-actively traded currencies monitored by Bloomberg, losing 0.4 per cent against the euro to 11.6388.
“The effect of the Bharti-MTN deal on the local currency will depend on how much money flows out of South Africa, versus how much flows in,” said Natheem Alexander, a bond and currency trader in Cape Town at Peregrine Quant.
“If a bigger amount flows into South Africa for the MTN stake than flows out for Bharti, it could strengthen the rand. If the opposite happens, the rand will probably weaken.”
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