JSE shares rally on Ramaphosa’s victory

BANKING, insurance and retail shares rallied on the JSE yesterday as investors reacted positively to Cyril Ramaphosa’s victory as the new president of the ANC.

Ramaphosa’s win on Monday evening saw the rand racing to R12.60 against the dollar. The JSE All-Share Index edged up 1.38 percent to 58 505 points yesterday.

Analysts said the shares had rallied because Ramaphosa was seen as a business-friendly candidate compared to his predecessor, Jacob Zuma.

TFG strengthened 9.81 percent to trade at R187, Mr Price was 6.24 percent higher at R241.70.

Sanlam was 9.27 percent stronger at R92.54. Barclays Africa jumped 7.83 percent at R184.92, Capitec was 4.06 percent higher at R1 041.63, Nedbank was R5.76 percent higher at R253.81, First Rand strengthened 5.96 percent to trade at R63.46, RMB Holdings was 5.44 percent higher at R74.07 and Standard Bank jumped 5.41 percent to R195.

Institute of Race Relations chief economist Ian Cruickshanks said Ramaphosa’s win had given the economy a boost, however, underlying problems in the economy remained unabated.

“We should not expect too much too soon from Ramaphosa. Change will not come in one day,” he said.

Cruickshanks added that the economy would be bolstered only when South Africa entered an era of job creation.

“We are not in a job creation era yet…

“We have an economy that is growing at 0.6 percent and we need to see job creation, more fixed investment and more building of factories in order for the economy to grow,” he pointed out.

Cruickshanks said once the economy improved, South Africa would see an improvement in retail spending.

“My advice is that investors need to be cautious before rushing into the market and should adopt a wait-and-see approach.”

Daniel Isaacs, an analyst at 36One Asset Management, said the retailers had run well, as the Ramaphosa win helped improve investor sentiment.

“Retailers ran well today. What is pushing the stocks is that foreign money has come in. Investors are pleased with the outcome of the ANC conference,” Isaacs said.

Isaacs added that the strengthening of the retail shares would be sustained if Ramaphosa’s victory translated into the recovery of the economy through pro-job creation policies.

In the latest Statistics South Africa data, retail sales moderated 3.2 percent year-on-year in October, weaker than the market forecast of 5.2 percent from 5.7 percent in September.

The ANC conference weighed heavily on retail sales, with analysts showing that even if the new leader of the ANC was welcomed by the markets, decisive and immediate action would be required to tackle corruption, restore fiscal sustainability, improve confidence and lift economic growth.

This would avoid the dreaded universal junk status and its damaging impact on capital flows, asset prices, interest rates and the rand, he added.