South African stocks index
rose as much as five per cent on Thursday, putting the main index on track for
its biggest one-day gain in more than three years.
The currency remained on
the front foot, soaring to its firmest since early 2015, in the wake of Zuma’s
exit.
Analysts have, however,
warned the rally faces serious obstacles ahead of a budget speech next
Wednesday.
Zuma quit late on
Wednesday, reluctantly heeding orders by the ruling African National Congress
(ANC) to bring an end to a nine-year tenure punctuated by scandals, stagnant
economic growth and policy uncertainty.
As at 1530 GMT, the blue
chip Top-40 index surged four per cent to 52,665 points, pulling back from a
high of 53,072 achieved earlier but still on course for its biggest one-day
gain since Sept. 2015.
The broader All-share index
was up by 3.72 per cent at 59,533 points.
“The big news is that Zuma
has now resigned and that has created a lot of euphoria.
“South African
incorporated, banks, retailers and the like are all looking sharply better as a
result,” said Independent Securities’ trader Ryan Woods.
South African banks
considered the barometer of both economic and political sentiment were a
feature on the gainers’ list.
The banking index surged
5.8 per cent with Nedbank rising 5.37 per cent and rival FirstRand up 6.4 per
cent.
Banks have largely borne
the brunt of Zuma’s policy decisions that included the sacking of two respected
finance ministers, Nhlanhla Nene and Pravin Gordhan.
That, along with a weak
economy, contributed to sovereign credit ratings downgrades to junk by S&P
Global Ratings and Fitch.
In reaction to Zuma’s
resignation, ratings agency Moody’s said it was focused on the new leadership’s
response to economic challenges. S&P Global Ratings said the leadership
change would not immediately affect the credit status.
Cyril Ramaphosa, former chairman
of African biggest telecoms operator MTN Group, was sworn in as president on
Thursday.
Mr. Ramaphosa, who has
vowed to fight corruption and revitalise the economy, is seen by business
leaders and investors as well placed to turn around the economy.
South Africa’s Gross
Domestic Product (GDP) is estimated to grow by less than one percent this year.
Another key issue facing
the 65-year-old president is policy uncertainty in South Africa’s mining
industry, an important economic engine, which has been fighting in court with
Zuma’s mines minister, Mosebenzi Zwane, over an increase in black ownership
targets.
But some analysts said that
the former union leader’s to-do list is way too long to make an immediate
impact.
In the foreign exchange
market, the rand advanced to levels last seen in February 2015.
“The good gains the rand
has made could be extended toward 11.55/dollar, and move toward 11.00/dollar
baring any further credit rating downgrades for S.A. and a credit positive
budget,” said Investec’s Chief Analyst Annabel Bishop in a note.
At 1515 GMT, the rand was
at 11.6600 against the dollar, having reached a session-best of 11.6025 earlier
per cent stronger than its New York overnight close and at levels last seen in
Feb. 2015.
“The economy is coming off
an extremely low base so there is good chance the optimism will be around for
some time, but Mr. Ramaphosa has to very soon move from the honeymoon phase to
the doing phase,” said Chief Executive of Canon Assets Management Adrian
Saville.
(Reuters/NAN)
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