Se­cret bal­lot de­ci­sion lifts rand

JSE reaches new high

The Star Early Edition - - BUSINESS REPORT - Kabelo Khu­malo

THE RAND yes­ter­day firmed to a month’s high against the dol­lar, while the JSE hit new highs on news that vot­ing by in to­day’s mo­tion of no con­fi­dence in Pres­i­dent Ja­cob Zuma would be con­ducted via se­cret bal­lot.

The rand shrugged off dis­ap­point­ing sec­ond-quar­ter unem­ploy­ment data, ris­ing to R13.18 be­fore set­tling at R13.2613 by 5pm.

The cur­rency traded at R13.45 be­fore Na­tional As­sem­bly Speaker Baleka Mbete made her an­nounce­ment yes­ter­day af­ter­noon, and re­cov­ered af­ter she had an­nounced her de­ci­sion.

Trea­suryOne an­a­lyst Al­let Op­per­man said the sharp re­ac­tion was based on the fact that the mar­ket had al­ready priced in that it was likely that Mbete would al­low a se­cret bal­lot.

“On Fri­day, we will have the Moody’s rat­ing re­view, and the ex­pec­ta­tion is that there will be no change in the rat­ing, but should there be a rat­ing down­grade, we can ex­pect mas­sive out­flows out of South Africa and the rand to take a bit of a knock,” Op­per­man said.

The lo­cal unit has be­come vul­ner­a­ble to the pos­si­bil­ity that Zuma could be forced out of of­fice. In the build-up to the pre­vi­ous eight mo­tions of no con­fi­dence brought against Zuma, the rand has strength­ened, only to weaken on his survival.

The rand started the month on the back foot, ex­tend­ing its losses to be­come the lone loser among emerg­ing-mar­ket cur­ren­cies, which made strides against the US dol­lar as the green­back nursed losses on scan­dals en­gulf­ing Pres­i­dent Don­ald Trump’s ad­min­is­tra­tion.

The rand tanked 3 per­cent last week, largely bog­gled down by a Moody’s re­port that ques­tioned the in­de­pen­dence of the SA Re­serve Bank and raised con­cerns about eco­nomic growth.

Dol­lar rally

The rand wob­bled on Fri­day’s US non-farm pay­roll num­ber that beat mar­ket ex­pec­ta­tions and caused the dol­lar to rally slightly.

Brown Brothers Har­ri­man said in a note that the rand had been the worst per­form­ing emerg­ing-mar­ket cur­rency since the be­gin­ning of this month, and the lo­cal unit was like a “ca­nary in a coal mine” among its peers.

William Jack­son, the se­nior emerg­ing mar­kets economist at Cap­i­tal Eco­nom­ics, said Mbete’s de­ci­sion had buoyed the rand and lo­cal mar­kets.

“The rand is up by about 1.5 per­cent against the dol­lar on the news, while yields on lo­cal cur­rency debt have fallen,” Jack­son said.

The yield on the bench­mark R186 bond, which broadly re­flects the cost of gov­ern­ment bor­row­ing, slipped about 10 ba­sis points to 8.53 per­cent in af­ter­noon trade – its low­est level since June – from 8.64 per­cent on Fri­day. The FTSE/JSE All Share In­dex hit a new clos­ing high above 55 400 points, sur­pass­ing a record set in April 2015. The in­dex closed yes­ter­day’s ses­sion at 56 163 points, from a pre­vi­ous close of 55 945.

Dave Mohr, the chief in­vest­ment strate­gist at Old Mu­tual Multi-Man­agers, said the rand was play­ing an in­creas­ing role in the prospects of the JSE.

Mohr said the rand had be­come sus­cep­ti­ble to global in­stead of do­mes­tic pres­sures.

“The im­proved per­for­mance from the lo­cal eq­uity mar­ket is en­cour­ag­ing, and fu­ture real-re­turn prospects are rea­son­able, if be­low the long-term av­er­age. It re­mains a very im­por­tant part of South African in­vestors’ port­fo­lios and should out­per­form bonds and cash over time.

“How­ever, short-term volatil­ity is al­ways a fac­tor with eq­uity in­vest­ing, and in­vestors’ pa­tience and per­se­ver­ance will be tested,” Mohr said.

Peter At­tard Mon­talto, a re­search an­a­lyst at No­mura, said the di­rec­tion of to­day’s vote would be piv­otal for eco­nomic in­di­ca­tors.

“We would ex­pect a very strong pos­i­tive re­ac­tion in South African as­set prices if the (no-con­fi­dence) vote passes, but af­ter that we may be into a pe­riod of much more ex­treme volatil­ity,” Mon­talto said.

“If the vote fails, as ex­pected, we would ex­pect some small re­trace­ment of to­day’s (Mon­day’s) strength af­ter the an­nounce­ment.”


Speaker of Par­lia­ment Baleka Mbete an­nounces that the vote in the de­bate on a mo­tion of no con­fi­dence in the pres­i­dent will be held by se­cret bal­lot.

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