Zuma court ruling boosts rand, shares

FTSE/JSE Africa Index Series

SOUTH African financial markets continued their bullish movements last week.

The rand started to move stronger since last Wednesday as better than expected manufacturing production (1.5 percent), mining production (6.9 percent) and gold mining production (7.7 percent) growth figures during August boosted market sentiment.

The decision by the Supreme Court of Appeal in Bloemfontein on Friday to uphold the High Court’s ruling that corruption charges must be reinstated against President Jacob Zuma, added to the positive sentiment on share, capital and the exchange rate markets, as foreign interest in South Africa returned.

On the JSE, the all share index was up four out of last week’s five days to a record high of 57 876.6 points at the close on Friday. This was 1.2 percent higher over the week and already 14.3 percent higher since the beginning of the year.

The Top40 index improved by 0.9 percent last week, and had surged by 17.2 percent since December 31 last year.

The industrial index has continued its sharp rally, gaining 1.4 percent last week and is now 20.4 percent higher than the opening level on January 3.

Financials, after weeks of sideways movements, recovered last week, as the index improved by 3.1 percent. Property shares also bounced back, shifting upwards by 3.2 percent. On Friday, just after the news of the court ruling, the R186 government bond has improved by 0.6 percent.

The rand recovered sharply last week on the back of a stronger dollar and the Zuma ruling. The currency gained 42c (3.2 percent) against the dollar last week and traded at R13.30 at the close of the JSE on Friday.

Against the euro, the rand improved by 36c (2.2 percent) to R15.74 on Friday afternoon and by 38c against the pound to R17.70.

Given the much stronger rand and the steady price of Brent oil around $56 (about R754) a barrel, the prospects for an increase in the price of petrol at the beginning of November deteriorated sharply last week.

This week, investors will await inflation data for September and retail sales figures for August.