August 2, 2018 / 4:29 PM / a year ago

UPDATE 1-South Africa's rand falls hit by growing trade tension, stocks falter

* Rand dips on trade tensions

* Stocks down in line with global markets (Adds latest prices, analysts comments)

JOHANNESBURG, Aug 2 (Reuters) - The South African rand lost ground against the greenback on Thursday as a bellicose United States Federal Reserve and escalating trade tensions weighed on emerging market currencies.

Stocks weakened knocked back by risk aversion.

At 1538 GMT the rand was 1.28 percent weaker at 13.4000 per dollar, compared to an overnight close of 13.2300.

A deepening trade dispute between the United States and China weighed on global stocks and bond yields, prompting investors to shed risky assets in favour of safer ones amid uncertainty over future tariffs.

“Headwinds are mounting for many emerging markets as escalating trade tensions, fairly lacklustre commodities price growth and continued policy normalisation across the developed world aggravate domestic woes, particularly in countries plagued by high levels of political risk,” Rand Merchant Bank analyst Nema Ramkhelawan-Bhana wrote in a note.

Bonds ended the day flat, with the yield on the benchmark paper due in 2026 at 8.68 percent.

On the bourse, shares closed sharply lower amid rising trade tension between the United States and China spreading from Asian markets to Europe.

The blue-chip Top-40 index closed 1.83 percent lower at 50,340 points, while the broader All-Share index ended 1.62 percent weaker to 56,470 points.

“Tech stocks have been driving the markets for a long time and recently taken a knock. The Zimbabwe elections are not helping and people are getting wary of how the land distribution issue will happen. There is a lot of profit taking at the moment,” said Cratos Capital equities trader Greg Davies.

The country’s ruling party, the African National Congress plan to amend the constitution to allow the state to expropriate land without compensation for redistribution to the poor has dampened investor risk sentiment, with concerns it could undermine property rights.

Market heavyweight Naspers which owns about 30 percent of the Chinese technology firm Tencent, shed 2.87 percent to 3175.32 rand after Tencent lost 2.82 percent at close in Hong Kong. (Reporting by Nomvelo Chalumbira Editing by Richard Balmforth)

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