Positive market sentiment over Ramaphosa presidency
Major SA banks gain a combined R60 billion
THE BANKING index yesterday rode the wave of positive sentiment following Cyril Ramaphosa’s election as president to reach a record high with major banks gaining a combined R60 billion.
The index added 572 points to close yesterday’s session at a record high of 10 479 points.
Doing the heavy lifting in the banking sector was Barclays Africa, which added 7.78 percent to R205.75. FirstRand’s share price ended the day 6.43 percent higher at R75.35, while Nedbank was 5.37 percent stronger at R290.83.
Standard Bank, Africa’s biggest lender by assets, saw its share price spike 5.13 percent to R218.60, while Capitec was muted, adding 2.06 percent to R830.00 as the bank continued to fight off allegations from Viceroy Research.
Maqhawe Dlamini, the chief investment officer of Vele Asset Managers, said the banking sector gained quite substantially on the back of an improved growth outlook and the sector rating now looked somewhat full.
“The bank sector will benefit from this growth outlook as corporates and retail customers increase investments and spending, respectively. With lower inflation expectation, the SA Reserve Bank will follow through with at least a cut or two in interest rates, which will increase the banks’ lending activities,” Dlamini said.
The all share index added 2 133 points – its highest daily gain in four years – closing the day at 59 533.1 points, against the 57 400 in the previous session, with the industrial, gold mining and resources stocks all up more than 2 percent on the day.
David Shapiro of Sasfin Wealth said: “The market has not priced in the strong rand’s impact on exporters. R12.50 against the greenback is probably the most comfortable level for the economy.”
The rand’s rally yesterday added to a long-running rally for the currency, which jumped sharply when Ramaphosa was elected head of the ANC.
The financial services sector also enjoyed a stellar day with Discovery rising 9.13 percent to R180.10, while Sanlam ended the trading session 7.26 percent higher at R96. Old Mutual’s share price rose 3.45 percent to R40.76 and Liberty inched up 2.31 percent at R128.70.
Tsitsi Hatendi-Matika, the head of retail investment management at Absa, said: “Markets are expected to continue to digest the new political paradigm as South Africa prepares to hear the Budget next week on February 21.” The rand also cheered the development, reaching R11.6304 at 5pm to continue its ride as the best-performing currency against the greenback since mid-December.
Ramaphosa inherited an economy that is on an economic turnaround supported by a synchronised global recovery, stronger commodities, better-than-expected mining production and manufacturing production, as well as retail sales numbers posted in the second half of 2017.
Tiffany Pollock, a forex and money market trader at Merchant West, said it was hard to believe that a Budget speech similar in calibre to the one delivered in October last year had been priced in.
“The case for some more rand strength has been made with the next question being what the next cabinet reshuffle look like hot on the lips of investors. However, as the rand is more fairly valued and the growth cycle continues to unfold, the potential for a large appreciation in the rand is limited,” Pollock said.