Rand surges

JOHANNESBURG. — The market appears to be backing only one horse in the African National Congress’ leadership race.

South Africa’s rand surged to the strongest level against the dollar in more than three months, bond yields fell and bank stocks climbed to a record as traders bet Cyril Ramaphosa is poised to become the next leader of the ruling party. That increases the risk of a selloff if Ramaphosa’s opponent, Nkosazana Dlamini-Zuma, pips him to the post, according to Medley Global Advisors.

“The market is assuming that Ramaphosa’s won, which is brave because the race is really close,” said Nigel Rendell, a senior analyst at Medley in London. “It’s being too cavalier. Even if Ramaphosa wins, he’s not the answer to all of South Africa’s problems.”

Ramaphosa, the nation’s deputy leader and one of its wealthiest black people, has pledged to revive the struggling economy and stamp out corruption. Dlamini-Zuma has echoed her former husband President Jacob Zuma’s call for “radical economic transformation” to redistribute wealth to the black majority, a shift investors fear may blow out the budget deficit and spark rating downgrades.

The South African currency rose as much as 2,5 percent before paring gains to trade 1,5 percent up at 12,9106 per dollar, the strongest since September 7 on a closing basis, as of 3:45 pm in Johannesburg. Its overnight implied volatility soared above 70 percent for the first time since 2008, suggesting traders are hedging for a large swing after the result, which may be announced later yesterday. An index of bank shares rose 4,6 percent.

The best scenario from investors’ point of view would be a win for Ramaphosa, with Human Settlements Minister Lindiwe Sisulu becoming his deputy, Rendell said. Bloomberg.