Local equities and the rand plummeted on Thursday as local investors digested news that SA’s political and economic prospects are in jeopardy.
Also read: Ramaphosa’s “resignation” set to rock South Africa
The rand fell by nearly 4% to R17.64/$, while the yield on the local ten-year government bond spiked 91 basis points to 11.71%, an 8% crash, and some local banks plunging.
This was the biggest fall in rand value since November 2016, while banking stocks had their worst slump since April 2020, at the height of the COVID-19 pandemic.
According to analysts, President Cyril Ramaphosa’s possible resignation has thrown SA’s political outlook into increased doubt, eroding hopes that structural reform efforts will help SA’s economy endure a looming global recession.
News24 reports that speculation that Ramaphosa might resign is forcing global investors to consider what SA’s politics would look like with a divided Parliament.
“The big concern here is what this means for the ANC and the role it plays in politics. They have been in power since the end of apartheid,” Capital Economics’ senior emerging markets economist Jason Tuvey told the publication.
Amid yesterday’s developments, the JSE All Share managed to climb 0.26%, driven by miners and firms with offshore interests, as Glencore jumped more than 6% and Sibanye-Stillwater gained 4.76%.
While Richemont added 5.48%, SA’s most valuable bank, FirstRand, fell by 9%, losing almost R35 billion in value, while Absa gave back almost 10%.
Speaking to News24, Sasfin Securities’ chief global equities strategist, David Shapiro, said that along with the lift to miners from the weaker rand, many had been seeking opportunities offshore, a further boost to international companies like Richemont.
“Globally things are starting to steady,” said Shaprio. “The JSE just turned positive [for the year]… and we were starting to breathe,” he told News24.
Meanwhile, IG senior market analyst Shaun Murison said that the rand was feeling “angst at local political instability” and had fast approached the R18/$ level, presenting some psychological resistance. A break through that level would suggest R18.40/$ and R18.60/$ as near-term targets, he said.
The rand slumped almost 7% to R21.61 against the pound and 6% against the euro (R18.52).
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